The average American is growing more pessimistic about the economy, as a key sentiment index fell to its lowest level since June 2022, marking one of the bleakest readings since the survey’s inception in 1952. But there's a twist: wealthy Americans are actually feeling better than ever, buoyed by soaring stock markets in another clear sign of a K-shaped economy.
Consumer Confidence Sinks To 50.3—One Of The Lowest Ever
The University of Michigan's preliminary reading for consumer sentiment plummeted to 50.3 in November, down from 53.6 in October and below economists’ forecast of 53.2.
This marks a 30% year-over-year drop, putting sentiment at levels not seen since the summer of 2022, when oil prices hovered above $100 per barrel and the Fed accelerated its aggressive rate-hiking cycle.
The subindex for current economic conditions plummeted from 58.6 to 52.3, marking the index’s lowest reading in its history. Meanwhile, the subindex for economic expectation eased from 50.3 to 49.
Chart: US Consumers Say It's Never Felt Worse—Current Conditions Index Hits Historic Low
“With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” said Joanne Hsu, director of the University of Michigan’s Surveys of Consumers.
The decline was broad-based, with sentiment falling across age, income and political groups. Still, inflation expectations showed mixed signals: near-term inflation rose slightly to 4.7% from 4.6%, while long-run expectations fell to 3.6% from 3.9%, indicating some anchored optimism.
Another potential cause of November’s negative sentiment is the cooling labor market. U.S. employers announced 153,074 job cuts in October, marking a 175% surge from last year and the worst October since 2003, according to Challenger, Gray & Christmas.
So far in 2025, layoffs have topped 1.09 million, a 65% increase year-over-year, putting the labor market on track for its worst year since 2020.
Bank of America's Michael Hartnett highlighted a rising unemployment rate among recent graduates, up to 8% from 4% in 2023, and warned that AI is triggering structural job losses that disproportionately affect middle-income workers.
AI Is Fueling A New Economic Divide
The forces behind this divide run deeper than inflation or shutdowns. According to Jordi Visser of 22V Research, the traditional link between corporate profits and labor demand has broken.
“Earnings per share continue to climb even as job openings and temporary employment fall,” said Visser. “This marks a historic decoupling between capital and labor.”
This trend has major implications for investing over the next decade. Visser anticipates a long period of economic dislocation marked by inequality, regional divergence and sectoral volatility. Capital will increasingly accrue to owners of productive assets, while labor's share of income shrinks.
Luxury and premium sectors may thrive, but mass-market retailers and mid-tier service providers could face a demand crunch.
Investors should prepare for a decade in which preserving and growing wealth requires understanding not just markets but also the societal transformations AI is driving.
Wall Street Eyes Worst Week Since April
Worsening labor market cracks and rising layoff fears on Main Street are starting to ripple through Wall Street.
The Nasdaq 100, tracked by the Invesco QQQ Trust (NASDAQ:QQQ), dropped 1.2% on Friday, bringing its weekly slide to 3.7%—on pace for its worst week since early April.
The S&P 500, via the Vanguard S&P 500 ETF (NYSE:VOO), also slipped 0.7%, extending weekly losses to 2.2%.
Nvidia Corp. (NASDAQ:NVDA) was 3.3% lower by mid-morning in New York, pushing the weekly selloff to over 10%.
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