Americans are worried about a return to ’70s vibes, the most recent University of Michigan Index of Consumer Sentiment shows—and, unfortunately, we’re not talking disco.
Consumers are anxious about both unemployment and inflation, researchers found, or the one-two economic punch known as “stagflation.”
Around 60% of consumers expect unemployment to increase in the next 12 months, Survey of Consumers Director Joanne Hsu said in a report, “a reading last seen in the Great Recession.”
Inflation fears are also elevated. Consumers predict inflation will rise by 4.9% over the next 12 months, up from 4.5% last month. That’s moderated somewhat from April and May, when consumers anticipated a rise in inflation upward of 6%.
Overall, the Index of Consumer Sentiment dropped for the first time in four months, preliminary data for August showed. It’s 5% lower than last month and down 13.7% from August 2024.
Consumer sentiment dipped in April and May of this year. The index fell to a rating of 52.2 for both those months, numbers nearing those seen during 2022’s period of high inflation. It rebounded sharply in the summer, reaching 61.7 in July. This month, it’s dropped to 58.6.
“Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April, when reciprocal tariffs were announced and then paused,” Hsu said about this month’s results.
Job fears worse than ’22: There are even some signs that consumers may be more anxious about the economy now than they were during peak inflation in 2022.
UMich. researchers compared consumer sentiment over the three-month period of August through October 2022, when inflation was at its highest, with May through July 2025. This year, only 24% of consumers expected to spend the same amount on items that had large price increases, versus 36% in 2022. The rest, in both years, said they’d cut back their spending on these items or stop spending altogether. Even higher-income consumers said they’d be more likely to cut back or stop spending now (67%) than in 2022 (55%).
Job fears could account for the gloomier sentiment, Hsu posits, pointing to the fact that in 2022, only around 32% of consumers thought unemployment would increase in the next year.
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