August consumer spending rose 0.9% from July, even as Americans’ confidence stayed subdued and the September jobs report showed slower payroll growth. That gap leaves the Federal Reserve looking past public sentiment to measurable economic data—and asking whether a small share of consumers is driving an outsized share of spending.
Spending Holds, Confidence Falls
Consumer sentiment has swung over the past six years, but it hasn’t returned to pre-pandemic levels, University of Michigan Consumer Sentiment Index data shows. The Conference Board’s Consumer Confidence Index also fell in September. Still, spending and other economic measures have held up despite gloomy survey readings.
Spending makes up about 70% of the U.S. economy. In August, it rose 0.9% from July; after inflation, the gain was 0.6%, the strongest monthly increase since March 2025. The personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, showed price increases had stabilized while consumers kept spending heavily.
Last month, Bank of America said its customers’ card transactions showed Americans were “still ramping up their discretionary spending across both goods and services.” The bank said the pattern suggested consumers spent because they wanted to, “and not because they have to.”
Chicago Federal Reserve President Austan Goolsbee said the Chicago Fed had tracked sentiment because it once offered a useful early signal of consumer 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 on the gap between sentiment and spending.
What the Averages Can Hide
Researchers at the event said sentiment now offers a weaker early signal for spending and Federal Reserve decisions, though a closer look at survey data could still help. Surveys often report the median response. Looking across the full distribution, researchers said, can expose patterns the 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 posed that concentration as a possibility, not a current finding.
Goolsbee said he wanted to examine survey components, including inflation expectations, as possible better signals of the business cycle than overall sentiment. “There are some measure of expectations in those data, and let's expand out some of those measures as being, perhaps, better indicators of where we are in the business cycle than just sentiment,” he said.
Jobs, Wages and the Fed’s Measures
The Labor Department’s September jobs report showed payroll growth had slowed, while wages in the previous month hadn’t kept up with inflation. Economists called the conditions “low hire, low fire,” not a wave of layoffs.
“Companies are not adding many people, and they are not laying many off either,” said Ken Mahoney, chief executive at Mahoney Asset Management. Firms had already “right-sized earlier,” he said, 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 the report was about 45,000 jobs a month, he said, so September fit a slow trend rather than marking a break in the economy.
When sentiment stops matching its historical role, Goolsbee said, Chicago Fed economists turn more to inflation, spending, hiring and economic growth statistics. Jerome Powell, described in the article as the last Federal Reserve chairman, often stressed keeping long-term inflation expectations “well anchored.” Goolsbee prefers market-based measures, including signals from Treasury yields, while some economists argue survey-based expectations work better. “I put out the call for research,” he said. “Tell me if that's a good measure.”