Introduction
As the United States economy navigates a rapidly evolving macroeconomic environment, top-line metrics — Q4 2025 gross domestic product (GDP) growth of 1.4%[1] and low unemployment of 4.3%[2] — present a picture of relative stability. These top-line economic indicators are masking the financial fragility of the average consumer. This fragility is particularly acute among low to mid-income groups — comprises approximately 42% of Consumption,[3] roughly 2/3 of GDP — where inflationary pressures on essential goods are disproportionately eroding discretionary income. Characterized by a reliance on record high-interest debt and depleted savings, this state poses a significant risk of triggering a deceleration in consumption-led growth.
Defining the Average American’s Financial Status
The current economic data presents a troubling picture of the average American’s financial status. In December 2025, disposable income rose 0.3% mark-to-market (MTM) and 3.8% year-over-year (YOY),[4] though beneath this rise in income lies a deteriorating personal balance sheet defined by rising liabilities and shrinking liquidity. Consumer spending in December 2025 rose 0.4%[5] while household debt rose to $18.78 trillion through Q4 2025[6] — a new historical high.
- The Debt and Savings Crisis: The cost of maintaining current living standards is increasingly being financed through leverage. As noted, household debt rose to record levels in Q4 2025. Concurrently, the most recent values indicated cash usage has declined to just 14% of all purchases[7] as consumers accumulate additional debt. This leverage has made their position more precarious given their lack of financial buffers; the 2025 Annual Emergency Savings Report indicates that the average American currently lacks $1,000 for emergency expenses.[8] Additionally, personal savings as a percentage of disposable income consistently dropped from March 2025 to December 2025 from 5.0% to 3.6%.[9]
- Early Signs of Strain: The strain on the consumer is already manifesting in specific spending behaviors and sentiment metrics.
- Declining Consumer Sentiment: Recent data from the University of Michigan Consumer Sentiment Index indicates a sharp erosion in consumer optimism. Consumer sentiment (56.6) remained in line with expectations but marked a -12.5% and 11.5% YOY drop for sentiment and consumer expectations, respectively.[10]
- Subprime Distress: In January 2026, the delinquency rate for subprime auto borrowers (over 60 days) reached 6.9%, the highest level recorded since data tracking began in the 1990s.[11]
The Profile of the Resilient Consumer
Despite the deterioration of the average American’s balance sheet, two primary factors are currently sustaining a perception of resilience:
- Labor Hoarding: Labor hoarding is a strategic business practice characterized by companies retaining a larger workforce than is immediately necessary for their current level of production or service, often to avoid the high costs and time associated with recruiting and training new staff when the market recovers. Evidence of this is found in the current “low hire, low fire” labor environment, where net job growth in late 2025 — November and December — averaged just 44,500,[12] yet layoff rates remained stable — 1.7million November 2025 and 1.8 million December 2025[13] — even as the unemployment rate ticked up to 4.3%.
- The Services Pivot: Consumer spending remains focused on experiences, as seen by the Transportation Security Administration (TSA) screening a record 906 million passengers in 2025[14] and air ticket sales reaching a historic $10 billion in January 2026.[15] While domestic airfares rose 2.2% YOY as of January 2026, 72% of Americans still plan to maintain or increase their travel spending this year.[16]
Expected Future Impact
The current stability appears to be an artifact of corporate retention and debt financing, both of which have limits. We anticipate three major pivots:
- The Labor Hoarding Pivot: Analysts predict a shift toward productivity and layoffs in 2026 as corporate margins tighten. Once the labor market softens, the income floor supporting current consumption will drop. Evidence of an impending employment crisis is mounting as the “low-hire, low-fire” environment of 2025 begins to fracture under corporate margin pressure. In January 2026, corporate layoffs surged by 118% YOY to 108,435, the highest January total since 2009 — as companies pivoted from hoarding labor to “harvesting productivity” through artificial intelligence (AI) and restructuring.[17] This shift supports projections from The Hill and other analysts that a “two-speed economy” is emerging, where unemployment could spike toward 6%[18] as firms prioritize productivity gains over headcount, potentially removing the income floor that has sustained consumer resilience.
- The Credit Cliff: With subprime auto delinquencies at historic highs, lenders are expected to tighten standards, leading to a “delinquency contagion” that moves into credit cards.
- The Sentiment Spiral: The January 2026 Consumer Sentiment Index reading (56.6) suggests that the “resilience” narrative is breaking. As consumer sentiment continues to fall below historical averages, the psychological shift from “doom spending” to “precautionary saving” will likely accelerate the economic slowdown.
Assessment
The current “resilience” is finite. Without a pivot in monetary policy or a decrease in the cost of living, the average American’s balance sheet is on a trajectory for default. Stagnating consumer sentiment serves as a leading indicator that the “macro-healthy” economy is showing signs of significant strain.
Conclusion
Top-line metrics are masking a deepening financial fragility. The widening gap between macroeconomic stability and individual insolvency, now reflected in consumer confidence, threatens to trigger a rapid deceleration in the consumption-led growth that powers the U.S. economy. In conclusion, despite persistent inflationary pressures and shifting economic forecasts, the consumer continues to spend. Current private label penetration trends indicate that private labels (store brands) are no longer viewed as “cheap options” but as “value without compromise.”
U.S. consumer demand for private-label goods reached a historic peak in 2025, with store-brand sales climbing 3.3% to a record $282.8 billion. This growth significantly outpaced national brands as households across all income levels, including over 80% of those earning above $100,000 — permanently integrated these products into their routines to balance value with quality.[19] Membership-based warehouse clubs have seen a significant surge in adoption among value-focused consumers. Industry data indicates a double-digit increase in membership fee revenue, as even high-income households increasingly transition to bulk purchasing strategies to mitigate the impact of rising costs.
Where Does Ankura Fit In
We support clients through: (1) assortment and market basket analysis; (2) product mix optimization; (3) pricing architecture; and (4) promotional strategy, to align with evolving consumer demand while preserving profitability. By identifying how and where consumers are reallocating spend, we enable organizations to compete effectively for the “trade‑down” consumer without diluting brand or value perception.
Ankura delivers strategic margin protection and operational efficiency initiatives, focused on labor optimization, fixed‑asset rationalization, and vendor renegotiation. These efforts are designed to stabilize earnings, improve cash flow, and create flexibility as companies adjust to shifting consumer fundamentals and a more constrained economic outlook.
[1] U.S. Bureau of Economic Analysis
[2] U.S. Bureau of Labor Statistics
[3] Dallas Federal Reserve: Consumer Spend by Income Group
[4] U.S. Bureau of Economic Analysis
[5] ibid
[6] https://www.newyorkfed.org/microeconomics/hhdc.html
[7] Atlanta Fed: Diary of Consumer Payment Choice
[8] Bankrate: 2025 Annual Emergency Savings Report
[9] U.S. Bureau of Economic Analysis
[10] The Surveys of Consumers, Survey Research Center at the University of Michigan
[11] Trading Economics: U.S. Car Loan Delinquency
[12] U.S. Bureau of Labor Statistics
[13] ibid
[14] https://www.tsa.gov/travel/passenger-volumes/2025
[15] Travel and Tour World: Ticket Sales
[16] IPX: Travel Forecast 2026
[17] Bureau of Labor Statistics: Job Openings and Labor Turnover
[18] The Hill: Trade Infrastructure
[19] Private Label Manufacturers Association (PLMA) and Circana, year-end 2025 industry report (January 2026)
