Sentiment Drops

US consumer confidence fell to its second-lowest level ever over concerns about the government shutdown and economic pressures.

Context

The University of Michigan has tracked consumer sentiment through monthly surveys since 1978. The index measures how confident Americans feel about their personal finances and the broader economy. High sentiment typically suggests consumers will spend more, while low sentiment often signals economic worry. The survey has become particularly important during the ongoing government shutdown, which has prevented federal agencies from publishing official economic data since late September.

Record-Lows

According to the University of Michigan, consumer sentiment dropped to 50.3 in early November, down from 53.6 in October. The reading came in below economist expectations and marked the lowest level since June 2022 – when historic inflation peaked during the pandemic and led to the lowest level of consumer confidence at 50.0.

The decline was widespread across Democrats, Republicans, and independents, affecting all age groups and income levels. The only group that didn't see declining confidence was households with large stock holdings, who benefited from continued strength in financial markets.

Job Market Concerns

Respondents showed increasing anxiety about employment prospects. The share of households expecting that unemployment will rise over the next year jumped to 62%, the highest level since 1980.

A separate Federal Reserve survey found that consumers anticipate difficulty finding work if they become unemployed. The unemployment rate stood at 4.3% in August, near a four-year high, before the shutdown halted official jobs data. Independent surveys suggest the labor market remains stable with no widespread layoffs.

Economic Divide 

The survey highlighted what economists call a "K-shaped economy," where higher-income households are thriving while lower-income consumers struggle.

The only group that didn't see declining confidence was households with large stock holdings, who benefited from continued strength in financial markets. Spending remains driven primarily by wealthy households, who account for 40% of total consumer spending despite representing just 20% of the population.