April 2025 — A Healthy Economy, Uneasy Consumers

April 2025 paints a picture of an economy that remains fundamentally strong, but with increasing signs of caution among households. Unemployment held steady at 4.2%, a level that is relatively low and near estimates of the natural rate. A stable, low unemployment rate at this stage is generally a positive signal: it suggests the labor market is functioning well without immediate overheating pressures.

Headline inflation dipped slightly by 0.1% to 2.3%, moving closer to the Fed’s 2% target. Interestingly, core inflation remained unchanged, indicating that the modest decline in overall prices was driven by volatile components such as food and energy rather than a broad-based easing of demand pressures. In other words, the underlying economy is still running hot, but temporary price swings in commodities helped push headline inflation down.

Inflation expectations remained elevated at 3.6%, reflecting continued household uncertainty. Even though prices are moving closer to target, consumers still anticipate higher inflation in the year ahead, hinting at lingering concerns about the economy.

Consumer sentiment, meanwhile, dropped further, with the Consumer Confidence Index falling to 52.2%. This sharp decline contrasts with the economy’s solid fundamentals and highlights a growing disconnect between economic performance and public perception. Households appear cautious, hesitant to spend, and possibly influenced by broader political or policy uncertainty.

Overall, April suggests a dual narrative. On one hand, the economy is healthy: low and stable unemployment, modestly easing inflation, and no obvious signs of overheating. On the other, consumers are signaling worry through declining confidence and elevated expectations, which could eventually feed back into slower spending and weaker aggregate demand. The contrast raises an interesting question: how can an economy perform so well while its people feel so uncertain? Watching whether confidence begins to align with economic fundamentals will be crucial in the months ahead.