Yardeni Research president Ed Yardeni discusses the economic factors heading into 2026 in Making Money.
Consumer feeling Interest rates rose in early January despite persistent concerns about inflation and a weak labor market, according to the latest release from the University of Michigan’s Surveys of Consumers.
Michigan’s Consumer Sentiment Index rose from a final reading of 52.9 in December to 54 in the January preliminary reading.
That was a bigger increase than expected by economists surveyed by LSEG, who expected the January figure to be 53.5. However, the reading of 54 in January was considerably lower than the reading of 71.7 a year ago, in January 2025.
“There were improvements among lower-income consumers in January, while sentiment fell among those with higher incomes,” noted Joanne Hsu, director of Surveys of Consumers.
THE US ECONOMY ADDED 50,000 JOBS IN DECEMBER AS UNEMPLOYMENT FALLS
The University of Michigan’s consumer confidence report rose more than expected in preliminary figures for January. (Robert Nickelsberg/Getty Images/Getty Images)
The report found that ahead this year inflation expectations were stable at 4.2% in early January, which is the lowest since January 2025, but well above that month’s inflation expectations of 3.3%.
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Consumers’ long-term inflation expectations rose slightly from 3.2% in December to 3.4% this month. By comparison, the figures ranged between 2.8% and 3.2% in 2024, and were below 2.8% in 2019 and 2020.
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“Although consumers saw modest improvement in the economy over the past two months, their sentiment remains nearly 25% below last January’s figures,” Hsu added.
“They remain largely focused on kitchen table issues, such as high prices and weakening labor markets. While consumer concerns about rates appear to be gradually subsiding, they remain wary about the overall strength of business conditions and labor markets,” she explains.
Hsu noted that more than 90% of pre-release surveys were collected before the Venezuelan leader’s arrest Nicolas Maduro during a raid by US special forces on drug and arms trafficking charges.
US economy expected to grow faster in 2026 despite stagnant labor market: GOLDMAN SACHS
The University of Michigan’s consumer sentiment report comes as the Department of Labor has been closely watching The December jobs report showing that the US economy added 50,000 jobs last month.
The modest job growth capped off a turbulent year for the labor market, which faced headwinds from shifts in the labor market immigration policy under the Trump administration, labor supply has declined.
Companies also faced great uncertainty under the government tariff policywhich underwent several changes following the president’s ‘Liberation Day’ tariffs announced in April.
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Lydia Boussour, senior economist at EY-Parthenon, wrote in a note: “In 2025, the economy added just 584,000 jobs — a sharp slowdown from the 2 million added in 2024 and the weakest annual increase outside a recession since 2003.”
