The Economy Is Technically Fine. Consumers Still Feel Terrible.

The April jobs report came in stronger than expected this week, with the U.S. adding 115,000 jobs while unemployment held steady at 4.3%. Economists had expected weaker hiring, continuing a recent streak of labor data consistently overshooting or undershooting forecasts in ways that make the broader economy increasingly difficult to read cleanly. Healthcare, transportation, warehousing, and other service-heavy sectors continued carrying much of the hiring load, helping calm immediate recession fears and pushing markets higher on the idea that the economy remains resilient.

At the same time, consumer sentiment fell to one of the weakest readings on record. The University of Michigan’s preliminary May sentiment index dropped to 48.2, well below expectations and near historic lows despite relatively stable unemployment and continued consumer spending. Inflation itself has cooled meaningfully from peak levels, but inflation psychology remains deeply embedded in household behavior. Earlier this week, the New York Fed reported that one-year inflation expectations rose again to 3.6%, reinforcing the idea that many consumers still expect elevated costs to persist. The result is an economy where official data continues signaling resilience while households increasingly describe the experience of living in the economy as exhausting, unstable, and financially hostile.

The K-Shaped Economy Is Becoming Harder To Ignore

The widening divide underneath the economy continues showing up across both spending and credit behavior. This week, the Wall Street Journal reported that the number of Americans with “super-prime” credit scores above 780 has increased by roughly 15 million over the last six years, driven in part by younger consumers aggressively optimizing their financial profiles. At the same time, rising delinquencies and financial stress continue appearing elsewhere in the credit spectrum, reinforcing the increasingly K-shaped nature of the economy.

Consumer spending itself remains surprisingly resilient overall, but much of that resilience appears increasingly concentrated among wealthier households and high-credit consumers. Recent New York Fed and bank research has pointed toward stronger spending persistence among higher-income groups even as many middle-income consumers quietly pull back underneath the surface. Increasingly, economic growth appears supported by consumers who still possess strong balance sheets, appreciating assets, or access to favorable credit, while other households experience the economy as persistently expensive and psychologically draining. Good credit, in many ways, is becoming both a financial advantage and a form of economic insulation.

Housing Got Rugged Again

Mortgage rates moved back toward the mid-6% range this week, once again undermining hopes that affordability conditions were meaningfully improving. While today’s rates remain below some recent peaks, consumers increasingly no longer view homeownership delays as temporary. Instead, many appear to be psychologically adapting to a world where buying a starter home may simply not happen on the timeline previous generations expected. More renters are delaying family decisions, staying in apartments longer, considering relocation to lower-cost regions, or quietly abandoning the traditional “starter home” progression altogether. Housing pessimism is becoming behavioral, not cyclical.

AI Is Great For Markets, Weird For Humans

The AI economy continues creating a strange split between markets and lived reality. Big Tech earnings and infrastructure spending remain strong enough to push equity markets higher, with AI-related capital expenditures increasingly functioning as one of the primary engines supporting economic growth narratives. But that same AI boom is also contributing to growing anxiety around hiring, productivity expectations, energy demand, and the long-term value of knowledge work. Investors continue rewarding AI optimism while workers increasingly question where exactly they fit into the transition. For now, AI is proving far more immediately beneficial for asset prices than for labor confidence.

The Underlying Theme: Fewer People Feel Included In Economic Success

Underneath nearly all of these stories is the same emerging pattern: the economy is still functioning, but fewer people feel meaningfully included in its success. Growth is increasingly concentrated among wealthier consumers, large incumbents, high-credit households, and AI-driven companies, while many ordinary consumers experience the economy as expensive, stagnant, and psychologically exhausting. The data may still describe resilience. The public increasingly describes survival.