Lower employment numbers and higher inflation worsen economists’ view
A negative employment report for February amid the escalating conflict with Iran has added to the already worrying outlook for the US economy.
The United States is not in a recession, but it may be in a recession.
Despite an upward trend over the past three months, the closely watched University of Michigan Consumer Confidence Index fell to 53.3 in March, lower than the preliminary reading of 55.5 two weeks ago, and also down from 56.6 in February and 57 this time last year. Among those surveyed, expectations for gasoline prices soared following the start of the Iran war on February 28, and inflation expectations also rose.
Sentiment declined across all age groups and political affiliations, said Michigan Research Director Joan Hsu, but “middle-to-upper income earners and consumers with equity assets, hit hard by both high gas prices and volatile financial markets following the Iran conflict, saw the biggest drop.”
The university’s index is based on a survey of U.S. households, and the results are scored using a 1966 baseline of 100. That means March’s readings are about 47 points below that historical baseline. Current consumer sentiment is generally considered low by historical standards. In June 2022, it hit an all-time low of 50, and in January 2000, it hit an all-time high of 112. The index has not exceeded 100 since February 2020, the month before the pandemic lockdown began.
How do Americans feel about the economy today?
The Current Economic Situation Index, which measures whether people feel their finances are better or worse off than a year ago and whether now is a good or bad time to buy goods, fell to 55.8 in March. This is down from 56.6 in February and 63.8 a year ago.
Frank Sorrentino, founder and CEO of ConnectOne Bank, said weak consumer sentiment could reflect rising borrowing costs, lingering inflation in certain categories, or persistent economic uncertainty.
“At the same time, when you actually look at what’s happening on the ground, the underlying economy still looks relatively resilient,” Sorrentino told USA TODAY. “Businesses are open, people are working, activity hasn’t decreased in any meaningful way. So what we’re seeing is some disconnect between how people feel and what they’re doing.”
Where do Americans expect the U.S. economy to go?
The Consumer Expectations Index, which reflects consumers’ outlook on their short- and long-term financial situation and the overall economy, fell to 51.7 in March. This is down from 56.6 in February and 52.6 at this time last year.
Expectations for year-on-year inflation rose to 3.8% in March from 3.4% in February, the largest single-month increase since April 2025.
Fears of a U.S. economic recession were already growing before the report was released. Mark Zandi, chief economist at Moody’s Analytics, said in a note that “even before the recent disconcerting events” in the Middle East, the firm’s model had increased the probability of an outbreak within the next 12 months to an “uncomfortably high” 49%.
Contact Rachel Barber rbarber@usatoday.com X Follow her at @rachelbarber_
