Consumer Sentiment Improves but Workers See Little Income Growth Ahead

• Year-ahead inflation expectations fell to 3.5% (lowest since January 2025), while assessments of current conditions jumped 5.4%, though future expectations slipped
• Labor Economy workers score seven points lower on sentiment indexes than other workers, with 27.2% expecting to fall behind financially in 2026 versus 21.1% of non-Labor workers
• Job openings rate declined to 3.9% in December from 4.5% a year earlier, leaving 1.2 unemployed workers per opening compared to two openings per job seeker less than two years ago

Summary

Key Findings:

Consumer sentiment rose modestly in February 2026, up 1.6% from January according to University of Michigan data released February 6, though remaining 11.4% below year-ago levels and 28% beneath the March 2024 post-pandemic high. Current conditions improved 5.4%, while future expectations declined slightly.

Critical Data Points:

• Year-ahead inflation expectations fell to 3.5%, the lowest since January 2025
• Long-term inflation expectations edged up to 3.4%, above pre-pandemic norms
• Job openings rate dropped to 3.9% in December from 4.5% a year earlier
• Approximately 1.2 unemployed workers exist per available position, down from 2:1 two years ago

Sector Focus:

The Labor Economy—comprising essential, hourly workers representing over one-third of U.S. employees and driving $1.7 trillion in annual spending—shows persistent weakness. These workers score seven points lower on sentiment indices than non-Labor Economy peers, with 27.2% expecting to fall behind financially versus 21.1% of other workers.

Market Implications:

The recovery remains fragile and unevenly distributed, driven primarily by stock market gains benefiting higher-income households. Approximately half of Labor Economy workers expect flat 2026 income with rising expenses, while only 30% anticipate financial improvement. Job security concerns persist, with 65.3% confident their skills will remain valuable amid technological disruption, compared to 73.7% of other workers.

Outlook:

While cooling inflation provides near-term relief, constrained income growth and reduced job mobility limit confidence. The report suggests targeted interventions—faster wage access, cash flow management tools, and skills development support—could address structural concerns for vulnerable worker segments.