In May 2026, the University of Michigan’s consumer sentiment index fell to 44.8, the lowest reading in its monthly record. That’s lower than in 1980, when unemployment was 7.5% and inflation was in double digits. It’s lower than in November 2008, in the middle of the financial crisis.
Today, unemployment is 4.2% and inflation is 3.7%. Neither is good news, but neither looks like a crisis. October’s final reading was 48, and the preliminary November reading rose to 51, still near the bottom. So we asked a simple question: given jobs and prices, how gloomy should people be?
What does the consumer sentiment index measure?
Each month, Michigan asks about a thousand Americans five questions. Are you better or worse off than a year ago? Will you be better off a year from now? Will business conditions be good over the next year and the next five years? Is now a good time to buy big things like a car or a fridge? The answers become one number. A reading of 100 means people felt about as good as in early 1966, when the scale was set.
Jobs and prices say it should be in the 90s
For 1978 to 2019, two numbers did a fair job of tracking the mood: the unemployment rate and the inflation rate. When jobs were scarce or prices rose fast, sentiment fell. Together they explained about half of its swings. We used those years to build a simple formula, then asked it what sentiment should be now.
The mood fell away from the data in 2021 and hasn’t come back.
For September, the latest month with all three numbers, the formula expects about 94.6. The actual reading was 48.1. That gap of 46.5 points is wider than in any month before 2020. The worst shortfall before then was 32.4 points, in November 2008, when banks were failing.
Here’s how the record lows compare:
Earlier lows came with high unemployment or fast inflation. This one didn’t.
| Low point | Sentiment | Unemployment | Inflation |
|---|---|---|---|
| May 1980 | 51.7 | 7.5% | double digits |
| Nov. 2008 | 55.3 | 6.8% | falling |
| June 2022 | 50 | 3.6% | 9.1% |
| May 2026 | 44.8 | 4.2% (Sept.) | 3.7% (Sept.) |
Is the survey itself part of the problem?
Partly. In 2024, Michigan moved its interviews from the phone to the web. People tend to answer a bit more darkly online. Michigan’s own analysis put the effect at about 6.6 points, and Yale Budget Lab estimated about nine. Take even the larger number off the gap, and today’s shortfall is still bigger than 2008’s.
Other surveys, like the Conference Board’s, have looked less grim. The Michigan index is a strong signal, but it isn’t an exact measure.
So why do people feel this bad?
My guess is that people are reading a different number than economists are. The inflation rate tells you how fast prices are rising now. It doesn’t show how far prices have already climbed. They’re about 28% higher than they were in January 2021.
Since early 2021, pay has only just kept up with prices.
This year added a fresh jolt. Reports tied the record low in May to gas prices pushed up by the conflict with Iran and shipping trouble in the Strait of Hormuz.
Average hourly pay rose about 27% over the same stretch. So pay has nearly kept up, but it’s still slightly behind: nearly six years of raises haven’t fully covered the higher prices. A raise feels earned; a higher grocery bill feels taken.
I see it at work. When the economy comes up, it’s almost always groceries, gas and eating out. My own budget is less squeezed: my mortgage is fixed, so rate news doesn’t touch the payment. But my monthly living costs went up about 12% in the past year. I don’t think the people around me are wrong.
I learned this in 2022 and 2023. Headlines said stocks had recovered, and my investment account did rise fast. But grocery and restaurant prices never came back down. I felt poorer while “the economy got better.” An investment account is a balance sheet. Prices hit your cash every month.
What I’d do with a bad mood
I watch whether the gloom spreads into spending, and I watch the survey’s inflation expectations, which eased to 4.3% in early November.
If your mood about money is bad, check your own finances before you act on the feeling. Do you have a few months of costs in cash? Are your loans fixed or variable? Does your income come from one place? If all three are fine, I’d stick with my plan. If one isn’t, fix that first. Does a mood this bad mean a recession is near? Not by itself, and our recession warning lights aren’t on yet.
The final November reading comes out later this month. It’s the first taken after the midterms, and about two months after the Fed’s rate hike in September.
Sources
Method: We took the monthly University of Michigan sentiment index, the unemployment rate and the 12-month change in the consumer price index from FRED. Using every month from 1978 to 2019, we fit a straight-line formula that predicts sentiment from unemployment and inflation (least squares). We then ran each month since 1978 through that formula and compared the result with the actual reading. Data: University of Michigan, BLS via FRED; calculated by MKViz. Code and data
- Federal Reserve Bank of St. Louis (FRED), Average Hourly Earnings of All Employees, Total Private
- University of Michigan, Surveys of Consumers
- Federal Reserve Bank of St. Louis (FRED), University of Michigan: Consumer Sentiment
- Federal Reserve Bank of St. Louis (FRED), Unemployment Rate
- Federal Reserve Bank of St. Louis (FRED), Consumer Price Index for All Urban Consumers
4 more sources
- Advisor Perspectives, Consumer Sentiment Recovers Significantly in November
- University of Michigan News, U-M consumer sentiment surveys remain robust measurement of economic behavior
- Al Jazeera, US consumer sentiment hits a near-record low before midterm elections
- Axios, Why one measure of consumer sentiment looks lower than the others