A tale of two economies

Editor’s note: This article first appeared in Money Matters, a newsletter from Britannica Money, on September 23, 2026.

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Your household finances may show a different picture than the broader economy.

© wifesun/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

I was struck by this recent headline on The Wall Street Journal online: “Corporate America’s Profits Are Booming—and Signal More Good Times Ahead.” The article was describing the view from the nation’s boardrooms—not necessarily what Americans are saying around the kitchen table. But if there’s one thing that’s clear, many consumers aren’t happy with the state of the economy. And that raises a question: Why the mismatch?

It’s not as if consumers have stopped spending. Unemployment remains relatively low, and corporate profits are booming. Yet years of higher prices and borrowing costs have left many households feeling squeezed. As it turns out, the economy described by the data and the one you experience every day can look quite different.

If you look at some of the usual measures of economic health, there’s plenty to like. The unemployment rate was 4.1% in August, lower than it was nearly 80% of the time since 1948. Employers also added 162,000 jobs, a sharp rebound following several months of weak hiring. The economy grew at a 1.5% annualized rate in the second quarter, while consumer spending rose 3.4%, despite higher prices.

Corporate America has been doing even better. Earnings per share (EPS) for companies in the S&P 500 jumped 53% in the second quarter from a year earlier, while sales rose nearly 16%. And nearly twice as many companies raised their profit forecasts for the current quarter as lowered them.

But none of those numbers tells the whole story. Nearly 40% of August’s job gains were in leisure and hospitality, where average weekly earnings were about $600. Meanwhile, information and financial activities—where weekly earnings averaged roughly $2,100 and $1,900, respectively—lost a combined 34,000 jobs. Hiring so far in 2026 has also slowed from the pace of recent years. The broad economic picture may look reasonably healthy, but your view can be quite different if you’re struggling financially.

Take a look at inflation. Consumer prices were 3.4% higher in August than a year earlier, up from a 2.4% inflation rate at the start of 2026. That’s well below the 9.1% peak reached in June 2022, but lower inflation means prices are rising more slowly; it doesn’t reverse the increases that came before. Prices in August were nearly 29% higher than they were at the end of 2019.

The cumulative increases of the past several years can still be felt every time you buy groceries, fill your tank, or pay the rent. Research suggests those higher price levels have become more important to consumer sentiment than concerns about income.

Then there’s the cost of borrowing, which isn’t directly captured by the Consumer Price Index. Mortgage rates have climbed to more than 7% from less than 3% during the pandemic, while rates on auto loans and credit cards have also risen sharply. One study suggests borrowing costs may explain much of the disconnect. When researchers added mortgage rates and other interest costs to their measure of inflation, about 71% of the gap between consumer sentiment and economic conditions disappeared.

Consumers have also changed their behavior to cope. In one Federal Reserve study, 80% said they had made an effort to cut expenses since 2019, such as comparison shopping or switching to cheaper brands. People who worked more hours or took a second job were also more likely to say they felt worse off. In other words, just because consumers have continued to spend doesn’t mean they are feeling flush. Sometimes it means they’re working harder to maintain the lifestyle they already had.

National economic indicators can tell you a lot about the economy, but your household has its own set of numbers. These four can tell you a lot about how you’re doing.

If your buying power is growing, your debt is manageable, and your emergency and retirement savings are on track, your household economy is probably in pretty good shape. If not, you don’t need a sentiment survey to explain why you feel squeezed.