US Consumer Sentiment Flat, Job Worries Weigh on Outlook

​US consumer sentiment remained depressed in October, highlighting the strain of ongoing inflation and growing concerns about the labor market. The University of Michigan’s preliminary reading came in at 55, essentially flat from September’s 55.1, and down more than 20% from a year ago.

The reading demonstrates how little progress has been made in restoring confidence. Even as wages have risen and spending has held up, Americans remain cautious, citing high prices and weakening job prospects as their main concerns.

Inflation and Employment Fears Dominate

Survey director Joanne Hsu noted that while there were slight improvements in current personal finances and near-term business conditions, these were offset by more pessimistic views on future finances and major purchases. Inflation expectations remain high, with respondents projecting prices will rise 4.6% over the next year, only slightly below September’s 4.7%.

Other surveys have pointed to similar unease. The New York Fed’s latest consumer expectations report showed households anticipating both higher inflation and rising unemployment. Economists say this combination is particularly worrying, since it suggests consumers are bracing for stagflation-like conditions where prices stay high even as job security weakens.

Shutdown Not a Key Factor — Yet

Interestingly, the University of Michigan survey found “little evidence” that the ongoing federal government shutdown is weighing directly on consumer attitudes. Instead, pocketbook issues, higher costs for everyday goods, and concerns about job availability remain the key factors.

That said, the shutdown has delayed the release of critical government data, such as official labor market and inflation reports. This has placed extra weight on private surveys and sentiment measures, amplifying their role in shaping market expectations. Investors and policymakers alike are relying on these snapshots to assess economic health in the absence of federal reporting.

Divergence Across Households

The survey also revealed a divide between income groups. While sentiment remains broadly negative, higher-income households, particularly those with significant stock holdings, have been somewhat insulated from the worst of the sour mood. In contrast, middle- and lower-income families report greater financial strain, with rising costs and concerns about job security hitting hardest.

This split mirrors the “K-shaped” recovery dynamic seen in recent years, where wealthier consumers benefit from asset market gains while lower-income groups feel the brunt of inflation. Analysts caution that this divergence may mask underlying fragility in household balance sheets, especially if unemployment climbs.

Looking Ahead

With the government shutdown delaying key data releases, consumer sentiment will remain a focal point for markets searching for clues about the economy’s direction. October’s reading suggests Americans are not expecting meaningful improvement in their financial outlook anytime soon. The next test will come as corporate earnings roll in and as investors weigh whether consumer spending can remain resilient in the face of higher prices and rising job market anxiety. For now, sentiment remains stuck in neutral — a reminder that the US economy’s soft landing remains far from guaranteed.