Republicans are less worried about the future than Democrats and Independents, but “consumers from all three political affiliations are in agreement that the outlook has weakened since February.”
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The Trump administration’s plan to bring jobs back to the U.S. by imposing tariffs on imported goods has a growing number of Americans worried that soon they’ll not only be paying higher prices but could also end up unemployed, according to a closely watched survey of consumers released Friday.
The University of Michigan Surveys of Consumers for March showed Americans expect inflation to surge to 4.9 percent in the year ahead — the highest reading since 2022 — and that the net balance of households who expect unemployment to increase is at levels not seen since the Great Recession of 2007-09.
Although the survey showed that Republicans are less worried about inflation and unemployment than Democrats and Independents, “consumers from all three political affiliations are in agreement that the outlook has weakened since February,” Surveys of Consumers Director Joanne Hsu said.
At 57.9 in March, the University of Michigan Index of Consumer Sentiment has fallen for three consecutive months, dropping 10.5 percent from February to March and 22 percent from December.
Joanne Hsu
“While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets,” Hsu said in a statement.
“Many consumers cited the high level of uncertainty around policy and other economic factors,” Hsu said “Frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences.”
Samuel Tombs, Chief U.S. Economist at Pantheon Macroeconomics, called the latest survey a “horrific report,” that shows uncertainty about U.S. economic policy and a sharp drop in stock prices have “greatly undermined” consumers’ confidence.
“Admittedly, confidence mostly has collapsed among Democrats, while remaining at a high level since the election among Republicans,” Tombs said in a note to clients Friday. “Political gloom among Democrats might not translate into much lower spending.”
Among Democrats, the University of Michigan Index of Consumer Expectations dropped 24 percent from February to March, compared to 12 percent for Independents and 10 percent for Republicans.
Samuel Tombs
Tombs said the resilience of confidence among Republicans suggests President Trump “is less likely to back down from imposing further tariffs and cutting spending than if everyone was downbeat, increasing the risk of a sharper slowdown.”
The latest reading of the Consumer Price Index on March 12 showed annual inflation falling in February for the first time in four months to 2.8 percent. Evidence that inflation is easing would usually push rates down, as investors gain confidence that the Federal Reserve will start cutting rates again.
Mortgage rates bottomed on March 3
A March 7 report showing hiring slowed in February and that the unemployment rate ticked up to 4.1 percent did take some pressure off of mortgage rates.
But all in all, mortgage rates have been on the rise since hitting a 2025 low 6.55 percent on March 3, according to rate lock data tracked by Optimal Blue. While still below a 2025 high of 7.05 percent registered on Jan. 14, rates for 30-year fixed-rate mortgages were 11 basis points higher on Wednesday than this year’s low.
Bond market investors who fund most mortgages could be demanding higher yields due to worries that if the U.S. gets caught up in a trade war, higher prices for consumers might make the Fed more reluctant to cut rates.
Futures markets tracked by the CME FedWatch tool show investors don’t expect the Fed to resume rate cuts until June. And the last time the Fed cut rates, during the final months of 2024, mortgage rates climbed from a 2024 low of 6.03 percent registered on Sept. 17.
Mortgage giant Fannie Mae’s most recent National Housing Survey showed only 30 percent of Americans surveyed in February expected mortgage rates to go down in the year ahead, down from 45 percent in November.
Mark Palim
“This growing pessimism makes sense, as mortgage rates had remained near the 7 percent threshold for a few months, including when we fielded this survey,” Fannie Mae Chief Economist Mark Palim said in a statement. “The decline in sentiment was further impacted by consumers’ growing concerns about their own personal financial situations.”
Although only 23 percent of employed Americans surveyed by Fannie Mae in February said they were concerned about losing their jobs in the next 12 months, that was up from 20 percent in November.
About 1 in 4 (24 percent) homeowners and renters surveyed said February was a good time to buy, up from 22 percent in January and 14 percent last May, which represented an all-time low in surveys dating to 2010.
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