US Consumer Spending Power Remains Uneven

Economic Growth and Consumer Spending

The US economy has shown a 4.3% annual growth in the third quarter of 2025, with consumer spending being the primary driver of this growth. This indicates that despite various challenges, consumers continue to play a crucial role in supporting the economy. However, a closer look at the data reveals that the purchasing power of consumers is not evenly distributed across different income groups.

Disparity in Purchasing Power

As the labor market begins to show signs of softening, with an unemployment rate of 4.6% as of November 2025, and concerns about inflation rise due to import tariff policies, middle and lower-class households are becoming increasingly cautious about their expenditures. This cautious approach to spending is reflected in the consumer sentiment indices, which remain significantly lower than the previous year. The sentiment is heavily influenced by anxiety about future economic conditions, including expectations of rising unemployment.

Impact on Economy

The uneven distribution of purchasing power and the cautious spending behavior of middle and lower-class households could have significant implications for the overall economy. As these households account for a substantial portion of consumer spending, any reduction in their spending could potentially slow down economic growth. Furthermore, the softening labor market and inflation concerns could exacerbate these trends, leading to a more challenging economic environment in the coming year.

Conclusion

In conclusion, while the US economy has shown resilience with a 4.3% growth in Q3 2025, driven by consumer spending, the underlying disparities in purchasing power and the cautious approach to spending by middle and lower-class households pose significant challenges. These challenges, combined with a softening labor market and inflation concerns, underscore the need for careful economic policymaking to support sustainable growth and equitable distribution of economic benefits.