Ed Yardeni, President of Yardeni Research, recently shared insights on the economic factors shaping 2026 during his appearance on Making Money.
Consumer sentiment showed a slight uptick in early January, despite ongoing worries about inflation and a sluggish labor market. New data from the University of Michigan Consumer Survey highlighted this trend.
The Michigan Consumer Confidence Index moved up from December’s closing figure of 52.9 to a preliminary January figure of 54. This increase was, in fact, much larger than the 53.5 that a group of economists surveyed by LSEG had anticipated. Nevertheless, January’s score of 54 is still considerably down from last year’s reading of 71.7 in January 2025.
Joan Hsu, director of consumer research, noted, “January saw an improvement among lower-income consumers, but sentiment declined among higher-income consumers.”
In related news, the US economy added 50,000 jobs in December, contributing to a drop in the unemployment rate.
The latest report indicated that inflation expectations held steady at 4.2% in early January, the lowest since January 2025, but still higher than the 3.3% expected for the month. Long-term inflation expectations rose slightly from 3.2% in December to 3.4% in January. For context, figures throughout 2024 varied between 2.8% and 3.2%, with even lower readings during 2019 and 2020.
Minutes from recent Federal Reserve meetings revealed a significant divide among policymakers regarding a rate cut in December, casting doubt on the likelihood of further reductions.
Overall, while consumers perceive a slight improvement in the economy over the past couple of months, their sentiment remains about 25% lower than it was in January last year, according to Su’s analysis. Many continue to prioritize concerns like high prices and a weakening labor market. Although worries about tariffs seem to be fading, apprehension regarding the economy’s robustness persists.Interestingly, data collection for this report largely occurred before the arrest of Venezuelan leader Nicolas Maduro, who was suspected of drug and weapon trafficking concerns during a recent US special forces operation.
The report from the University of Michigan was released alongside significant statistics from the Department of Labor, which confirmed the job growth in December. This moderate increase came after a tumultuous year for the labor market, influenced by various shifts—particularly in immigration policy under the Trump administration—which led to a diminished labor supply.
Businesses navigated growing uncertainty tied to several changes in customs policy, which aligned with President’s “Emancipation Day” tariffs introduced last April.
Lydia Boussour, a senior economist at EY Parthenon, commented on the job market’s performance, noting that the economy only added 584,000 jobs in 2025. This marked a notable slowdown from the 2 million jobs created in 2024, representing the weakest annual increase since 2003, excluding recessions.
