“divergence between higher-wealth, higher income consumers and their lower-wealth, lower-income counterparts”
Preliminary results from the February 2026 survey
University of Michigan economics’ report does not see a dynamic economy for the overall nation. It portends gains for the upper income populace and not so much in store for the lower income brackets. Largest stockholders can look forward to a good year. Those further down, a not-so-great year. Labor market still remains weaker than a year ago. If somebody said recession is near, I would not disagree. Have to wait and see.
The only thing the University of Michigan has not said is “recession.”
Surveys of Consumers, University of Michigan, Joanne Hsu, PhD, Director
Consumer sentiment was essentially unchanged, inching up less than one index point from last month and sitting about 20% below January 2025. Sentiment surged for consumers with the largest stock portfolios, while it stagnated and remained at dismal levels for consumers without stock holdings.
On net, modest increases in current personal finances and buying conditions for durables were offset by a small decline in long-run business conditions. While sentiment is currently the highest since August 2025, recent monthly increases have been small—well under the margin of error—and the overall level of sentiment remains very low from a historical perspective. Concerns about the erosion of personal finances from high prices and elevated risk of job loss continue to be widespread. Interviews for this release cover the two-week period that ended this past Monday.
Year-ahead inflation expectations fell from 4.0% last month to 3.5% this month, the lowest reading since January 2025. This month’s reading still exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years prepandemic. Long-run inflation expectations inched up for the second straight month, from 3.3% last month to 3.4% this month. In comparison, readings ranged between 2.8% and 3.2% in 2024, and were below 2.8% throughout 2019 and 2020.
Overall views of labor markets remain considerably weaker than a year ago, though changes from last month are a bit mixed. This month, a substantial 60% of consumers expect unemployment to rise in the year ahead, down a touch from January and the lowest share seen since July 2025. Meanwhile, the expected probability of own job loss climbed to its highest reading since July 2020. Thus, consumers continue to perceive risks to both sides of the Fed’s dual mandate.
While views of the economy converged across population subgroups last spring amid announcements of the new tariff regimes, the 10 or so months thereafter have been characterized by a sharp divergence between higher-wealth, higher income consumers and their lower-wealth, lower-income counterparts. As seen in the chart, sentiment for the largest stockholders is currently nearly 50% higher than May 2025, when national sentiment reached a trough. In contrast, sentiment for non-stockholders fell 6% during this period.
These trends are consistent with the fact that asset values have soared, which benefits asset owners but not others. Notably, similar divergent patterns in sentiment were seen in 2023-2024 as well. Sentiment for high and low wealth groups converged in 2022 when post-Covid inflation peaked. In the two years that followed, sentiment for the wealthy soared while it languished for lower-wealth consumers. As such, the K-shape of sentiment seen over the past year is not a new phenomenon.
These patterns highlight the ongoing heterogeneity in experiences and expectations for the economy that are obscured by headline aggregate statistics about the economy. Robust aggregate spending is consistent both with strength stemming from the disproportionate share of spending generated by wealthier consumers who are more confident, as well as the fact that less-confident, lower-wealth consumers may be exercising much more care over their spending amid pressures from high
prices and weakening income prospects.
Year-ahead inflation expectations fell from 4.0% last month to 3.5% this month, the lowest reading since January 2025. This month’s reading still exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years prepandemic. Long-run inflation expectations inched up for the second straight month, from 3.3% last month to 3.4% this month. In comparison, readings ranged between 2.8% and 3.2% in 2024, and were below 2.8% throughout 2019 and 2020.
Overall views of labor markets remain considerably weaker than a year ago, though changes from last month are a bit mixed. This month, a substantial 60% of consumers expect unemployment to rise in the year ahead, down a touch from January and the lowest share seen since July 2025. Meanwhile, the expected probability of own job loss climbed to its highest reading since July 2020. Thus, consumers continue to perceive risks to both sides of the Fed’s dual mandate.
While views of the economy converged across population subgroups last spring amid announcements of the new tariff regimes, the 10 or so months thereafter have been characterized by a sharp divergence between higher-wealth, higher income consumers and their lower-wealth, lower-income counterparts. As seen in the chart, sentiment for the largest stockholders is currently nearly 50% higher than May 2025, when national sentiment reached a trough. In contrast, sentiment for non-stockholders fell 6% during this period.
These trends are consistent with the fact that asset values have soared, which benefits asset owners but not others. Notably, similar divergent patterns in sentiment were seen in 2023-2024 as well. Sentiment for high and low wealth groups converged in 2022 when post-Covid inflation peaked. In the two years that followed, sentiment for the wealthy soared while it languished for lower-wealth consumers. As such, the K-shape of sentiment seen over the past year is not a new phenomenon.
These patterns highlight the ongoing heterogeneity in experiences and expectations for the economy that are obscured by headline aggregate statistics about the economy. Robust aggregate spending is consistent both with strength stemming from the disproportionate share of spending generated by wealthier consumers who are more confident, as well as the fact that less-confident, lower-wealth consumers may be exercising much more care over their spending amid pressures from high
prices and weakening income prospects.
