Americans are telling pollsters they feel bad about the economy even as several standard gauges of the economy point the other way. The University of Michigan’s preliminary September reading of consumer sentiment came in at 47.8, down 13% from a year earlier. Meanwhile the unemployment rate sits at 4.1%, and employers added 162,000 jobs in August. That gap — a gloomy mood against a labor market that is still adding workers — is what Goldman Sachs economist Joseph Briggs tried to explain in a note to clients this week, according to CNBC. His answer: part of the disconnect may reflect how happy people are, not only how they are doing financially.
What Goldman argues
CNBC reported that Briggs told clients “low reported economic sentiment likely reflects a more fundamental, downbeat assessment of the state of the world rather than the economy.” To back that up, CNBC reported that Briggs pointed to the General Social Survey — a long-running national survey run by NORC at the University of Chicago — which, CNBC reported, shows happiness never fully recovered from a drop during the pandemic: the share of respondents describing themselves as “very happy” fell to 23% in 2024 from 31% in 2016, while the share saying they are “not too happy” rose from 13% to 20% over the same stretch, according to CNBC’s account of the survey data. Overall happiness, per CNBC’s summary of Briggs’ analysis, declined more sharply than a separate measure of financial satisfaction tracked in the same survey. Briggs also linked the trend to falling trust in institutions; CNBC reported that he found lower trust in these institutions caused a “disproportionate amount” of the decline in net happiness in recent years.
To be sure, Briggs did not dismiss the economy itself: CNBC reported that he said inflationary pressures are likely also hurting confidence. His argument is that lower happiness can partially explain why sentiment keeps diverging from other measures of the economy’s performance, such as GDP growth or the stock market, that CNBC describes as offering “rosier views.” Goldman’s note itself has not been made public; the details here come from CNBC’s reporting on it.
What the data show
Joanne Hsu, the University of Michigan survey’s director, has offered her own explanation for September, and it points to prices and trade. In the September release, Hsu said “with a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come,” and noted that “sentiment is now 16% below February, prior to the start of the Iran conflict, and 13% lower than a year ago.” The September components were also lower: the Current Economic Conditions index sits at 50.9 and the Index of Consumer Expectations at 45.8, both down from August. Year-ahead inflation expectations rose to 4.6% in September from 4.0% in August — the highest since June — while the long-run figure ticked up to 3.4% from 3.3%. The two accounts aren’t necessarily rivals: CNBC reported that Hsu told the network earlier this year that the downtrend in sentiment mirrors readings showing both decreasing happiness and trust in public institutions.
It’s also worth noting what September is not: the lowest reading in the survey’s history, 44.8, came in May, then 49.5 in June and 55.2 in July before slipping again. September’s 47.8 is a decline, not a new bottom.
Other gauges tell a mixed story. The Conference Board’s Consumer Confidence Index stood at 89.4 in August, down slightly from 90.2 in July — chief economist Dana Peterson called it a “second consecutive month” of moderating confidence. On the economy itself, the Bureau of Labor Statistics reported the consumer price index up 3.4% year-over-year in August, with core inflation (excluding food and energy) at 2.4%. The Bureau of Economic Analysis reported that inflation-adjusted consumer spending rose “less than 0.1 percent” in July, essentially flat. Prices are still up 3.4% from a year earlier while inflation-adjusted spending barely moved in July — the kind of pressure Briggs himself says is also weighing on confidence.
Why it matters
If Briggs is right that broader unhappiness is weighing on sentiment surveys, that changes how much weight those surveys deserve as an economic signal. As a result, CNBC reported, Briggs said consumer sentiment may become a less useful predictor of economic dynamics. Readers watching for the next data point have one set on the calendar: the University of Michigan releases its final September sentiment reading on Friday, Sept. 25, at 10 a.m. ET, which will show whether the preliminary drop holds up once the full survey sample is in.
This article is explanatory, not financial advice.