Chicago Federal Reserve President Austan Goolsbee says consumer sentiment has become a much less reliable guide to spending. Central-bank economists now lean harder on figures for inflation, hiring, spending and economic growth. Ordinary people’s feelings still matter to researchers, but measurable activity carries more weight in the institution’s reading of the economy.
Whose numbers count
“Americans are still ramping up their discretionary spending across both goods and services, suggesting consumers are increasing their spending because they want to and not because they have to,” Bank of America said last month in an analysis of its customers’ card spending. That account of customer purchases sits beside a more troubled measure: consumer sentiment has fluctuated over the past six years and still hasn’t returned to pre-pandemic levels, according to University of Michigan Consumer Sentiment Index data. The Conference Board’s Consumer Confidence Index also fell in September.
The disconnect matters to the Chicago Fed because consumer spending accounts for about 70% of the U.S. economy. Goolsbee said the bank had tracked sentiment as a useful leading indicator of spending. “And over the last six years, it has become a much less good leading indicator of consumer spending,” he told journalists at an event discussing the split between what people report and what they buy.
The Fed’s preferred inflation measure, the personal consumption expenditures price index, showed price increases had stabilized while consumers continued spending heavily. Spending in August rose 0.9% from July. Adjusted for inflation, it increased 0.6%, the strongest monthly gain since March 2025.
Households can report gloom while the totals still look sturdy. The measures tell different stories, and central-bank economists are turning toward statistics they consider more useful when sentiment stops predicting what consumers will do.
Workers face the slow lane
The Labor Department’s monthly jobs report showed September payroll growth had softened, while wages in the previous month hadn’t kept pace with inflation. Economists described the situation as “low hire, low fire” rather than a wave of layoffs. Workers face limited hiring and pay that lagged inflation in the previous month; the report didn’t describe mass firings.
“Companies are not adding many people, and they are not laying many off either,” said Ken Mahoney, chief executive at Mahoney Asset Management. “A lot of firms already right-sized earlier, and AI may be taking a little of the edge off new hiring, but this is not a wave of firings. The 12-month average gain going into this report was only about 45,000 jobs a month, so September fits a slow trend more than a break in the economy.”
The figures leave a contrast between substantial consumer spending and softened hiring, with wages in the previous month failing to keep pace with inflation. No layoffs wave. No hiring rush either.
What the averages conceal
Researchers at an event said sentiment is now less useful as a leading indicator for spending and Federal Reserve decisions, though closer examination of survey data could still help. Surveys often report the median response; examining all responses could expose patterns that a median hides, including whether a small group accounts for most spending.
“If we got into a world where 90% of the spending was done by 10% of people, we have to think about what does it mean for overall GDP (gross domestic product) growth and what is it going to mean for overall employment,” Goolsbee said. He also said he wants to examine parts of sentiment surveys, including inflation expectations, as potentially better indicators of the business cycle than overall sentiment.
Jerome Powell, described in the article as the last Federal Reserve chairman, often stressed keeping long-term inflation expectations “well anchored.” Goolsbee said he prefers market-based measures, such as signals from Treasury yields, while some economists argue survey-based expectations are better. “I put out the call for research,” he said. “Tell me if that's a good measure.” The institution is still deciding which signals deserve its trust; spending rose 0.9% in August from July.