At a Glance

  • Consumer confidence rose slightly this month despite persistent anxiety over inflation and a weak job market, data released Friday by the University of Michigan showed.
  • The consumer sentiment index rose to 52.9 from 51 in November. One-year inflation expectations fell to 4.2%, the lowest in 11 months, but remain well above January's 3.3%, the university said, citing survey results.
  • "Sentiment remains nearly 30% below December 2024, and pocketbook issues continue to dominate consumers' views of the economy," Joanne Hsu, director of the university's Surveys of Consumers, said in a statement. "63% of consumers still expect unemployment to rise over the next year," she said.

Deeper Insights

Recent data may do little to ease consumer concerns. The U.S. Bureau of Labor Statistics said Tuesday that the unemployment rate rose to 4.6% last month, the highest in four years, as government layoffs announced in the spring took effect. The unemployment rate was 4.4% in September.

Meanwhile, inflation slowed to a 2.7% annual rate last month from 3% the prior month, below expectations. However, rent and several other price data may have been suppressed due to a six-week disruption in data collection caused by the federal government shutdown.

"Some categories had distorted data, which probably lowered the CPI reading by about a tenth (of a percentage point)," New York Fed President John Williams said Friday in an interview with CNBC. "It's hard to know" the extent of the distortion, he said.

Core consumer prices, which exclude volatile food and energy costs, rose 2.6% last month, the Bureau of Labor Statistics reported Thursday. The bureau calculated annual inflation rates in the report, but monthly price changes for 18 of 21 categories, including energy, services, and groceries, were not released.

Given the data gaps, "analysts will continue to treat September's 3% CPI level as the starting point, rather than Thursday's November data," Douglas Holtz-Eakin, president of the American Action Forum, said Friday in a report. The December inflation report, released in January, will "clarify the true trend," he said.

Household dissatisfaction with inflation persistently above the Federal Reserve's 2% target has begun to show up in political polls.

"Inflation and its fuzzier cousin, 'affordability,' have been a thorn in the side of the Trump administration," said Holtz-Eakin, who served as chief economist of the President's Council of Economic Advisers from 2001 to 2002.

President Donald Trump has repeatedly called on the central bank this year to sharply cut its benchmark interest rate. Fed Governor Stephen Miran, Trump's former chief economist, has dissented on all three of the central bank's monetary policy decisions this year, calling for half-percentage-point rate cuts.

The Fed cut its federal funds rate by 25 basis points on December 10 to support the labor market, and based on the median projection of central bank officials, it expects only one more 25-basis-point cut in 2026.

"I personally don't feel an urgency to adjust monetary policy further right now because I think the cuts we've made put us in a good position," Williams said.

"I want to see inflation come down to 2% without causing undue damage to the labor market," Williams said. "It's a balancing act," he said, referring to the risk that keeping the main interest rate too high for too long could slow the job market.