Recession Signals Flash as Consumer Confidence Sinks to 12-Year Low

2026-01-28 economy

New York, Tuesday, 27 January 2026.
In a concerning start to 2026, US consumer confidence has cratered to 84.5, marking its lowest point since May 2014 and surpassing even the sentiment lows of the COVID-19 pandemic. This sharp 9.7-point decline in January highlights a growing rift between resilient GDP figures and the financial reality felt by households. Crucially, the Expectations Index—a forward-looking gauge of income and business conditions—plummeted to 65.1. This metric has now remained below the critical 80-point threshold for a full year, a pattern that historically signals an impending recession. Despite a stable 4.4% unemployment rate, consumer perception of the labor market has soured significantly, with the net assessment of job availability hitting its weakest level since 2016. Driven by persistent inflation, tariff anxieties, and political uncertainty, this data suggests the American consumer is entrenching against a perceived economic contraction.

Deteriorating Views on Current Conditions

The magnitude of the decline in consumer sentiment took economists by surprise, as the Conference Board’s headline index fell 9.7 points to 84.5, significantly missing the consensus forecast of 90.9 [1][2][4]. This reading represents the lowest level of consumer confidence since May 2014, erasing over a decade of sentiment gains [1][3]. While the headline number draws attention, the internal components of the survey reveal a broad-based erosion in stability. The Present Situation Index, which assesses consumers’ current view of business and labor market conditions, slid 9.9 points to 113.7 [1][2]. According to Dana Peterson, the Chief Economist at the Conference Board, confidence effectively “collapsed” in January as concerns deepened regarding both the present economic landscape and the future outlook [1][2].

Labor Market Anxiety Intensifies

A primary driver of this gloom is a swift deterioration in how Americans perceive the job market, which contrasts sharply with the official unemployment rate of 4.4% [1][8]. In the January survey, the percentage of respondents describing jobs as “plentiful” fell to 23.9%, down from 27.5% in December [1][8]. Conversely, those claiming jobs are “hard to get” rose to 20.8% [1]. This shift has collapsed the labor market differential—a key metric derived by subtracting the “hard to get” response from the “plentiful” response—to just 3.1% (calculated as 3.1) [5]. This represents the worst net reading since 2016, excluding the pandemic era, indicating that workers are feeling a distinct cooling in hiring demand [5].

Inflation and Policy Concerns Persist

Beyond the labor market, the survey highlights that Americans remain beleaguered by the cost of living. Write-in responses from the survey cited elevated prices for food, groceries, and gasoline as primary sources of distress, with average 12-month inflation expectations ticking up in January [1][2]. The political and global environment is also weighing heavily on the consumer psyche; mentions of tariffs, trade policy, and domestic politics increased in January, alongside rising concerns regarding health insurance and war [1][4]. This pessimism was widespread across the political spectrum but was most acute among Independents, who registered the sharpest decline in confidence [2].

Sources

consumer confidence economic indicators