Peter Jones, CFA
Executive Vice President
Equity Research and Portfolio Manager
The mood among American consumers, by many accounts, is grim. This sense of uncertainty and anxiety has been pervasive in 2025. Both military and trade wars continue to simmer as political divisions widen. The cumulative weight of inflation, concerns about the U.S. fiscal situation and interest rates that remain higher than their pre-COVID levels—all contribute to a collective unease. The alarmist tone from much of media only serves to amplify these anxieties, creating a climate where apprehension seems to be the default setting. Since the pandemic, we have observed a persistent breakdown between consumer attitudes and underlying economic fundamentals.
Historically, consumer confidence indices have served as reliable barometers of economic health. A confident consumer, one who feels secure in their job and financial future, is more likely to spend money and thereby drive economic growth. Conversely, a fearful consumer tightening their purse strings can create a self-fulfilling prophecy of economic slowdown.
This historical correlation has been thrown into question in recent years. “Soft data” indicators, such as consumer sentiment surveys and even manufacturing surveys, are consistently signaling weakness. “Hard data” continues to tell a story of resilience. This breakdown suggests that these sentiment-based surveys may no longer be as reliable in forecasting economic activity as they once were.
Consumer spending represents nearly 70% of U.S. economic output and is the most critical factor of economic growth. This is why we consistently emphasize that, “As goes the consumer, so goes the U.S. economy.” Given this backdrop of widespread trepidation, one might expect to see a significant contraction in consumer spending. Yet, here lies the paradox: This negative sentiment is conspicuously absent from real-world data. Retail sales, a tangible measure of consumer behavior, continue to rise, defying prevailing pessimism. Whether it’s online purchases, big-ticket items, or everyday essentials, Americans are, by and large, still opening their wallets.
While surveys and anecdotes paint a picture of a cautious consumer, their actual spending habits tell a different story. The resilience of retail sales suggests that, despite their stated anxieties, consumers are either finding ways to cope with economic pressures, or their concerns haven’t yet translated into a significant curtailment of discretionary spending.
The underlying strength of the labor market is a key driver of continued consumer spending. As of May 2025, wage growth continues to be robust, increasing by approximately 4% year-over-year. Furthermore, the number of job openings remains high, roughly matching the number of unemployed individuals.
This ratio, hovering near 1-to-1, indicates a labor market that is effectively in equilibrium. There is a job available for every person seeking one. Although the demand for labor has softened in the last couple years, this isn’t a sign of a market in distress. Rather it is one that is balanced, providing a strong foundation for consumer spending and job security, regardless of how they may feel about the headlines.
With healthy consumer spending and a robust labor market in terms of both employment and wages, we are inclined to base our investment decisions on what consumers are doing rather than what they are saying. We will continue to prioritize the empirical evidence of economic activity over the fluctuating tides of sentiment. We would change our view if we began to see undeniable cracks forming in the bedrock of the labor market—a sharp rise in unemployment or a material contraction in consumer spending.
For now, while the American consumer may be concerned about their future, they’re still shopping. In the world of economics, action speaks louder than any lament.