U.S. households still aren’t buying the “soft landing” story. In December, consumer sentiment rose, but not by much, and still came in lower than expected.
The University of Michigan’s sentiment index inched up to 52.9, just a 1.9-point rise from November. That was short of the 53.5 median forecast from economists surveyed by Bloomberg. Basically, Americans are still downbeat, and they’re not hiding it.
“Despite some signs of improvement to close out the year, sentiment remains nearly 30% below December 2024, as pocketbook issues continue to dominate consumer views of the economy,” said Joanne Hsu, who heads the Michigan survey.
Even worse, the current conditions gauge dropped to 50.4, the lowest ever recorded. That’s how bad things feel on the ground.
Americans expect weak job growth and rising unemployment in 2026
There’s no escaping the job market mess. The expectations gauge, which looks at how people feel about the future, did move up a little. But it’s still being dragged down by real concerns. In fact, consumer views on buying big-ticket items, like cars and appliances, just hit an all-time low. Not because people don’t want things. Because they can’t afford them.
And it’s no wonder. Job growth in November was weak, and unemployment hit 4.6%, the highest it’s been in four years. Most economists don’t think that’s changing anytime soon. They expect more slow hiring and stubborn unemployment well into next year. Hsu said nearly two-thirds of people in the survey think joblessness will keep rising in 2026.
To try and stop the bleeding, the Federal Reserve cut interest rates again this month, the third straight cut. But inside the Fed, things are tense. Officials are split over what to do next. Some want to keep cutting to protect the job market. Others still have inflation anxiety. And the split means there’s no clear plan for 2026.
Still, Hsu said labor market views improved just slightly. Just not enough to move the needle in a meaningful way.
Fed officials question inflation data as CPI underperforms expectations
Over at the New York Fed, President John Williams didn’t seem too happy with the inflation numbers for November. On CNBC’s “Squawk Box,” he said the headline CPI was pulled lower by “technical factors.”
Williams explained that government workers missed data collection in October and the first half of November, and that skewed the results.
“There were some special factors or practical factors that really are related to the fact that they weren’t able to collect data in October and not in the first half of November. And because of that, I think the data were distorted in some of the categories, and that pushed down the CPI reading, probably by a tenth or so,” Williams said.
He added that they’ll get a clearer picture with the December report, but for now, the 2.7% annualized CPI rise last month was a bit of a fluke. Wall Street had expected 3.1%, so the miss caught attention.
Williams pointed out that the numbers mostly came from the second half of November, when retailers were dropping prices across the board due to sales. He also mentioned issues with rent calculations and other categories. But he wasn’t completely pessimistic.
“Some of the data that we’re seeing is actually pretty encouraging in the sense of the CPI news. And I think it represents a continuation of the disinflationary process we’ve seen,” he said.
Still, consumers aren’t buying it. They think prices will rise 4.2% in 2026, almost a one-year low, but still high. Over the next five to 10 years, they expect inflation around 3.2%. That’s not exactly confidence.
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