Why do Americans look so depressed while the economy appears to be doing so well?
The economy expanded at its quickest rate in two years in the third quarter of 2025, yet year-end surveys of Americans reveal that they are anxious and dissatisfied. What caused the disconnect?
If you pay attention to what Americans are saying, blame politicians, inflation, and tariffs.
A consumer confidence survey in December reached an eight-month low and hovered around the lowest point since the outbreak. Another widely watched consumer sentiment survey ended 2025 close to a record low.
Meanwhile, according to a recent estimate, the economy expanded at its quickest pace in two years during the third quarter. Growth in the second quarter was likewise very rapid.
Read: Before the government shutdown, the U.S. economy gained 4.3%, according to GDP. greatest gain in the past two years.
Strong U.S. growth was fueled by consumer spending—the same folks who tell pollsters they are pessimistic—which is even more perplexing.
The fact that Americans spend the majority of their money on necessities rather than wants may contribute to the discrepancy between what they say and how much they spend.
Consider the official economic scorecard, the gross domestic product data for the third quarter. After a robust 2.5% gain in the second quarter, consumer expenditure grew at a swift 3.5% rate.
Healthcare, insurance, clothing, auto repairs, petrol, housing, and utilities accounted for the majority of third-quarter expenditures. Since the epidemic, the cost of the majority of these products and services has increased.
Other spending simply came from Americans buying new vehicles and other expensive things faster before higher prices linked to U.S. tariffs took effect, particularly in the second quarter.
Tariffs continued to have an impact. Additionally, during the summer, they increased inflation, which had been reducing to low prepandemic levels.
Americans were already saddled by the largest inflation surge in forty years, and this year’s inflation recovery made matters worse.
“Inflation fatigue was fading in 2024 before tariffs revived those concerns,” stated Thomas Simons, Jefferies’ chief U.S. economist.
Furthermore, tariffs increased corporate expenses and created enough economic uncertainty to deter employers.
The unemployment rate has slowly increased to a four-year high of 4.6%, but the number of new jobs generated this year has plummeted. Americans are particularly depressed due to a dismal work market.
There are many reasons for Americans to be concerned, including a record 43-day government shutdown and a turbulent first year of President Donald Trump’s second term in office.
Americans attributed their discontent to “prices and inflation, tariffs and trade, and politics,” according to Dana Peterson, chief economist at the Conference Board, which published the study on consumer confidence.
Families with lower incomes, who often bear the brunt of ongoing inflation and joblessness, were especially anxious.
If consumers are dissatisfied and struggling financially, how long can the economy continue to grow?
The good news is that consumer sentiment no longer has as much of an impact on the direction the economy will take. It seems that the historic partnership has been broken up.
Think about this: For the eleventh consecutive month, a survey asking consumers what they think the economy will look like in six months has fallen below the threshold that indicates an impending recession.
Nevertheless, there hasn’t been a recession, and analysts for the Wall Street DJIA SPX don’t anticipate one in 2026. In fact, the majority of economists believe that U.S. growth may accelerate.
Why?
For starters, inflation is probably going to drop down once more as a result of the tariffs. Jobs will be a little simpler to find as a result of firms having more confidence to spend and hire.
For its part, the Federal Reserve has been lowering interest rates and is probably going to do so once more in 2026. The economy always benefits from cheaper money.
In contrast, business profits are very high and will probably remain so. Businesses are anticipated to increase their investments in AI, which will boost the economy.
In 2026, the government may also be able to assist the economy. The Trump administration wants to loosen regulations, some new tax incentives are going into effect, and every White House attempts to boost the economy with more expenditure during an election year.
It remains to be seen if all of this results in a change in customer attitudes, but one thing is certain: Customers’ actions speak louder than their words.
