Research
August 06, 2025
Consumer outlook
Consumer resilience will be tested by a slowing labor market
Consumers were the driving force behind the economic resiliency in recent years. Backed by an ever-expanding labor market, consumers maintained the confidence and financial wherewithal to continue spending at a healthy pace.
That resilience may now be at risk, as some cracks are beginning to appear in the labor market. Job growth slowed to a crawl in recent months, with the last three months representing the weakest gains since 2020.
On the flip side, the unemployment rate remains extremely low by historical standards and wages continue to rise. As long as we don’t start seeing net job losses each month, most consumers should remain generally confident in their employment situation.
As always, restaurant sales will remain tied to the strength of the economy. If consumers have a job, they will likely look past the economic uncertainties and try to maintain their spending levels.
This article presents the latest trends in key indicators that impact consumers’ ability and willingness to spend. Visit this page throughout the year for ongoing analysis of the state of the American consumer.
Consumer confidence remains dampened despite a recent uptick
The recent economic uncertainty among households was reflected by a sharp downturn in The Conference Board’s Consumer Confidence Index. This measure of consumer sentiment declined in five consecutive months (December 2024 to April 2025) – settling at its lowest level since April 2020. That was largely due to declines in the expectations component of the index, which measures consumers’ short-term outlook for income, business, and labor market conditions. Although consumer confidence rebounded somewhat in recent months, the index remains well below its readings at the beginning of the year.
Job growth slowed significantly in recent months
Employment growth slowed to a crawl in recent months, amid rising levels of uncertainty. The economy added an average of 35,000 jobs during the 3-month period from May to June. That was down from an average monthly gain of 123,000 jobs during the first 4 months of 2025, and represented the weakest stretch since 2020.
Wage growth is slowing but remains above historical averages
Although job growth slowed in recent months, wage growth remained relatively solid. Average hourly earnings of private sector employees increased 3.9% between July 2024 and July 2025. That was 2 percentage points below the strong gains posted during 2022, but still remained above the 3.3% average gain during 2019.
Savings rate dipped below pre-pandemic levels
Household savings soared during the first year and a half of the pandemic, driven primarily by reduced consumer activity as well as income-supporting fiscal stimulus packages. Many households used these excess savings to support elevated spending levels, which blunted the impact of soaring inflation. Savings rates are now below pre-pandemic levels, which means the financial cushion that many households established during the pandemic is largely depleted.
Household wealth declined in the first quarter
Household wealth rose to record highs during the pandemic, driven by a surging stock market and accelerating home values. These two indicators reversed trend in 2022, which resulted in a decline in total household net worth. By the fourth quarter of 2024, total household net worth had rebounded to reach a new record high of nearly $171 trillion. However, the first quarter of 2025 saw a 0.9% drop (or $1.6 trillion) in household wealth, due largely to declines in the stock market.
Household debt continues to rise
Household debt trended steadily higher in recent years, with aggregate balances reaching $18.4 trillion by 2025:Q2. That was $4.2 trillion higher than the 2019:Q4 level. Mortgages represent the bulk of household debt at 70%, followed by auto loans (9%) and student loans (9%).
Revolving credit levels continue to rise
Consumer credit balances fell to a 4-year low during the early months of the pandemic – primarily because households had fewer places to spend their money. That trend quickly reversed as restrictions eased and the economy reopened. Revolving consumer credit rose sharply during the last 4 years, which easily wiped out all of the balance reductions posted during the early months of the pandemic. By May 2025, total revolving credit balances reached $1.3 trillion, which was more than $250 billion (or 24%) above their pre-pandemic peak.
Debt service remains in check
Despite the elevated debt levels, debt service remains manageable for households on the aggregate. The Federal Reserve’s Debt Service Ratio, which is the ratio of total required household debt payments to total disposable income, was just over 11% in 2025:Q1. While that was higher than the lows posted during the first half of 2021, it was slightly below pre-pandemic readings.
Overall delinquency rates are trending higher
While debt service levels remained manageable in historical terms, overall delinquency rates trended higher in recent quarters. As of 2025:Q2, 4.4% of outstanding household debt was in some stage of delinquency. That was up nearly 2 full percentage points from the recent low of 2.5% in 2022:Q4, and was approaching the 2019 average of 4.6%.
Credit card delinquencies are rising sharply
Along with an uptick in overall delinquency rates, the percentage of credit cards that were severely delinquent rose dramatically in recent quarters. As of 2025:Q2, 12.3% of credit card debt was at least 90 days delinquent. That was unchanged from 2025:Q1, which represented the first time in three years that this metric didn’t increase on a quarter-to-quarter basis. Although it leveled off, the credit card delinquency reading is up from a recent low of 7.6% in 2022:Q3 and at its highest level in 14 years.
That resilience may now be at risk, as some cracks are beginning to appear in the labor market. Job growth slowed to a crawl in recent months, with the last three months representing the weakest gains since 2020.
On the flip side, the unemployment rate remains extremely low by historical standards and wages continue to rise. As long as we don’t start seeing net job losses each month, most consumers should remain generally confident in their employment situation.
As always, restaurant sales will remain tied to the strength of the economy. If consumers have a job, they will likely look past the economic uncertainties and try to maintain their spending levels.
This article presents the latest trends in key indicators that impact consumers’ ability and willingness to spend. Visit this page throughout the year for ongoing analysis of the state of the American consumer.
Consumer confidence remains dampened despite a recent uptick
The recent economic uncertainty among households was reflected by a sharp downturn in The Conference Board’s Consumer Confidence Index. This measure of consumer sentiment declined in five consecutive months (December 2024 to April 2025) – settling at its lowest level since April 2020. That was largely due to declines in the expectations component of the index, which measures consumers’ short-term outlook for income, business, and labor market conditions. Although consumer confidence rebounded somewhat in recent months, the index remains well below its readings at the beginning of the year.
Job growth slowed significantly in recent months
Employment growth slowed to a crawl in recent months, amid rising levels of uncertainty. The economy added an average of 35,000 jobs during the 3-month period from May to June. That was down from an average monthly gain of 123,000 jobs during the first 4 months of 2025, and represented the weakest stretch since 2020.
Wage growth is slowing but remains above historical averages
Although job growth slowed in recent months, wage growth remained relatively solid. Average hourly earnings of private sector employees increased 3.9% between July 2024 and July 2025. That was 2 percentage points below the strong gains posted during 2022, but still remained above the 3.3% average gain during 2019.
Savings rate dipped below pre-pandemic levels
Household savings soared during the first year and a half of the pandemic, driven primarily by reduced consumer activity as well as income-supporting fiscal stimulus packages. Many households used these excess savings to support elevated spending levels, which blunted the impact of soaring inflation. Savings rates are now below pre-pandemic levels, which means the financial cushion that many households established during the pandemic is largely depleted.
Household wealth declined in the first quarter
Household wealth rose to record highs during the pandemic, driven by a surging stock market and accelerating home values. These two indicators reversed trend in 2022, which resulted in a decline in total household net worth. By the fourth quarter of 2024, total household net worth had rebounded to reach a new record high of nearly $171 trillion. However, the first quarter of 2025 saw a 0.9% drop (or $1.6 trillion) in household wealth, due largely to declines in the stock market.
Household debt continues to rise
Household debt trended steadily higher in recent years, with aggregate balances reaching $18.4 trillion by 2025:Q2. That was $4.2 trillion higher than the 2019:Q4 level. Mortgages represent the bulk of household debt at 70%, followed by auto loans (9%) and student loans (9%).
Revolving credit levels continue to rise
Consumer credit balances fell to a 4-year low during the early months of the pandemic – primarily because households had fewer places to spend their money. That trend quickly reversed as restrictions eased and the economy reopened. Revolving consumer credit rose sharply during the last 4 years, which easily wiped out all of the balance reductions posted during the early months of the pandemic. By May 2025, total revolving credit balances reached $1.3 trillion, which was more than $250 billion (or 24%) above their pre-pandemic peak.
Debt service remains in check
Despite the elevated debt levels, debt service remains manageable for households on the aggregate. The Federal Reserve’s Debt Service Ratio, which is the ratio of total required household debt payments to total disposable income, was just over 11% in 2025:Q1. While that was higher than the lows posted during the first half of 2021, it was slightly below pre-pandemic readings.
Overall delinquency rates are trending higher
While debt service levels remained manageable in historical terms, overall delinquency rates trended higher in recent quarters. As of 2025:Q2, 4.4% of outstanding household debt was in some stage of delinquency. That was up nearly 2 full percentage points from the recent low of 2.5% in 2022:Q4, and was approaching the 2019 average of 4.6%.
Credit card delinquencies are rising sharply
Along with an uptick in overall delinquency rates, the percentage of credit cards that were severely delinquent rose dramatically in recent quarters. As of 2025:Q2, 12.3% of credit card debt was at least 90 days delinquent. That was unchanged from 2025:Q1, which represented the first time in three years that this metric didn’t increase on a quarter-to-quarter basis. Although it leveled off, the credit card delinquency reading is up from a recent low of 7.6% in 2022:Q3 and at its highest level in 14 years.