Consumer Says: Consumer outlook remains quietly stable in August

Temperature check on the U.S. economy

In each edition of Consumer Says, our economists give an updated rating for current economic conditions using temperature as a metaphorical metric. Our “perfect temperature”--signifying an economy that is strong but not overheating–is 70 degrees. 

🌡️Current temperature: 64 ℉

As the summer nears its close, we are once again holding our temperature gauge on the U.S. economy steady at 64 degrees–still somewhat below the ideal 70 degree day. While labor market concerns remain prevalent, as cited by Fed Chair Jerome Powell in his comments last week at Jackson Hole, the most high frequency metrics on consumer health tracked by Morning Consult are continuing to show steady strength. The softness in the labor market is notable, but it does not seem to be escalating at a worrying pace. Meanwhile, sentiment, spending, and debt burdens have maintained stable trajectories in recent months, and even the greatly-feared tariff implementations have so far had little effect on the consumer inflation experience or future expectations.

Consumer says

📊Consumer sentiment holds steady: The Conference Board released its Consumer Confidence report this week, with the headline measure slightly beating consensus expectations with a 97.4 reading. Relative to the big swings observed from January through May of this year, the last three months of readings have fluctuated within a narrow band.

• 📣 Consumer Says: Morning Consult’s daily ICS has shown a similar trend toward growing stability through late August, with sentiment for U.S. adults remaining close to the same level consistently since June. By various income groups, however, there are more substantial changes, with high earners continuing an upward trajectory in sentiment while low and middle income adults broadcast flat or slightly deteriorating views on the economy and their financial situations.

💼  Hiring is weak, but layoffs are low. Initial unemployment claims offer one of the highest frequency views of job losses, and readings have been relatively mild through last week. While the 4-week moving average for new unemployment claims had reached its highest point since 2023 earlier this summer, it subsequently declined to a more moderate level. The more worrying sign is continuing claims, which have continued to rise and recently hit their highest level since the initial aftermath of the pandemic. This development is likely a result of soft hiring; the slow drip of newly unemployed adults, whether due to job loss or labor force entry or re-entry, is gradually accumulating as it takes longer and longer for applicants to find a job.

• 📣Consumer Says: Morning Consult’s Unemployment index has drifted higher over the past month, but remains lower than it was a year ago. There are notable differences among different types of workers, however. By education, which can serve as a proxy for different worker skillsets, trajectories of unemployment have differed in recent weeks and months. Workers with college or postgraduate degrees have had improvements in unemployment outcomes over the past year, though college degree holders have given back some of this progress more recently. Meanwhile, those with fewer years of education have had relatively flat employment trends over the past year, or, in the case of the “some college” group, a slight rise in joblessness.

🛒 Spending continues to grow: Last week’s retail sales report showed a solid consumer through July, with monthly retail purchases increasing 0.5% month over month. Furthermore, the estimate of June spending was revised even higher, boosting the overall impression of consumers’ sustained appetite to spend–albeit somewhat judiciously–following a volatile start to the year as a result of tariff disruptions.

• 📣Consumer Says: Perhaps the strongest signal of consumer resilience in 2025 across Morning Consult’s economic datasets is the Consumer Health Index (CHI), which has steadily risen this year throughout periods of volatility in sentiment. This measure is designed to track overall spending demand among consumers in real time, combining the underlying component of sentiment most strongly linked to spending (current personal finances) with lagged changes in unemployment. While proven out in historical correlations with spending, the theory behind these components is that sentiment tracks desire to spend and employment changes act as a proxy for ability to spend (for instance, times of high inflation may discourage consumers from splurging on excess discretionary items, but if the job market remains simultaneously strong the ability to make needed purchases may remain intact despite falling sentiment).