The personal finances of consumers sank by 13% in May, with 57% of households reporting that high prices were eroding their financial stability, according to Joanne Hsu, director of the University of Michigan’s Surveys of Consumers. This marks an increase from 50% last month, as the cost of living continues to be a primary concern for the working class. The U.S. consumer sentiment index dropped to a fresh all-time low of 44.8 in May, falling for the third straight month from a preliminary reading of 48.2 and below the 49.8 level recorded at the end of April. This new low surpasses the previous record of 49.8 set in April and a historical trough seen in June 2022, marking the lowest sentiment recorded since the University of Michigan’s survey began 74 years ago in 1952.
The decline in sentiment is directly linked to high gas prices, the escalating cost of living, and inflation worries stemming from the U.S.-Iran war. CNN reported that this imperialist conflict, alongside the U.S.-Israeli war in Iran, has created an oil supply crunch and subsequent price shocks, exacerbating an affordability crisis already worsened by years of high inflation. Lower-income consumers and those without college degrees have experienced the sharpest declines in sentiment, as increases in the cost of fuel and other essential goods disproportionately impact these segments of the working class. Americans are now reportedly feeling worse than during previous wars, the 1970s oil crisis, the September 11 attacks, the Great Recession, the Covid-19 pandemic, and the inflation surge that followed.
The Cost of Imperialism
Gas prices have been rising as the Strait of Hormuz, a critical passageway for the shipping of oil and other vital goods, has been effectively choked off for nearly three months. This disruption, a direct consequence of the U.S.-Iran war, has fueled fears of higher prices across the economy. Inflation expectations for the year ahead rose to 4.8% from 4.7% last month, a significant increase from the 3.4% reading observed in February before the war began. Longer-term inflation is now expected to rise to 3.9%, up from 3.5% in April. These near- and long-term inflation expectations have returned to rates last seen during the latter part of last year, when tariffs further contributed to inflationary pressures on the working class. Joanne Hsu noted that consumers are concerned inflation will increase and proliferate beyond fuel prices, even in the long run, indicating a deep-seated anxiety about the systemic nature of these price hikes.
Capital's Gains, Labor's Losses
While working-class households face eroding finances, global markets have remained volatile as investors weigh the potential end of the war and the long-term ramifications of elevated oil prices. This focus on investor concerns highlights the divergent interests between capital and labor. The 30-year Treasury bond yield this week reached its highest level since before the financial crisis, and the benchmark 10-year Treasury note yield touched levels not seen in over a year. These shifts in financial markets reflect the re-pricing of assets in an environment of sustained inflation, which can benefit holders of certain financial instruments while simultaneously burdening those dependent on wages.
The State's Priorities
The Federal Reserve has signaled its reduced willingness to lower interest rates amidst these inflationary pressures, a policy stance that prioritizes the stability of capital markets over the immediate relief of the working class. Fed Governor Christopher Waller stated that while longer-term inflation expectations appear "well anchored," he finds it "concerning" that some expectations from one to five years ahead have moved up since the beginning of 2026. This official concern over inflation expectations, rather than the material conditions of the dispossessed, underscores the state's primary function in managing the system's contradictions to preserve its foundations. The state's actions, or inactions, in this context serve to protect accumulated wealth by allowing the systematic underpayment of labor through inflation, rather than addressing the root causes of the affordability crisis driven by imperialist conflict and resource control.