American consumers entered 2026 with a slightly brighter outlook, though calling it optimism might be generous. The University of Michigan's preliminary consumer sentiment index rose to 54 points in January, up from 52.9 in December and topping the expected 53.5. That's the highest reading since September 2025, which tells you something about how rough the past few months have been.
Who's Feeling Better (And Who Isn't)
The sentiment gains mark the second consecutive monthly improvement, but the details reveal an interesting split. Joanne Hsu, director of Surveys of Consumers, noted that lower-income consumers drove January's improvement while sentiment among higher-income households actually declined.
According to Hsu, consumers "continue to be focused primarily on kitchen table issues, like high prices and softening labor markets." The good news? Worries about tariffs appeared to be "gradually receding." The not-so-good news? Consumers remained "guarded about the overall strength of business conditions and labor markets."
Here's some perspective: even with the recent uptick, sentiment sits nearly 25% below where it was in January of last year. So we're talking about less pessimism, not actual enthusiasm.
The Job Market Stays Steady (If Unexciting)
That cautious mood makes sense when you look at December's employment numbers. Employers added just 50,000 jobs, missing the 60,000 estimate, while the unemployment rate fell to 4.4%, better than the predicted 4.5%. It's the kind of report that doesn't inspire cheers but doesn't trigger panic either.
The bigger picture looks even less impressive: job growth averaged only 49,000 per month throughout 2025, down sharply from 168,000 per month in 2024.
Bill Adams, chief economist at Comerica Bank, called December's report "so-so," capping what he described as a disappointing year for the labor market. He pointed to several headwinds weighing on hiring: tariffs, government spending cuts, housing market weakness, and artificial intelligence adoption. Despite the lackluster numbers, Adams suggested the data would likely be "good enough for the Fed to hold rates steady at their next decision."
Peter Williams of 22V Research saw a silver lining in the household survey data, noting that the unemployment rate actually dipped to 4.38%. He said this should "substantially reduce fears of a looming or just beginning nonlinear easing in the labor market." Translation: we're not seeing signs of a sudden collapse in employment.