The Federal Reserve is extracting purchasing power from working households to protect asset prices. Economic reporters are laundering a soft-landing story by treating a distributional collapse as methodology noise.
The Conference Board’s consumer confidence index came in at 91.2 in June, up 0.6 points from May. The index collapsed to 84.5 in January — the lowest reading since May 2014 — and has moved in a narrow band since. June’s reading remains below the year-ago 95.2 and a fraction of the 120-plus the Conference Board regularly posted before the pandemic. The University of Michigan’s index, released in mid-June, stood at 44.8 — a level still below readings seen during the worst stretches of the Covid-19 pandemic. The Michigan reading remains below the depths of the initial pandemic lockdowns. Two indices, built differently, sampling differently, asking slightly different questions of different households, and arriving at widely separated numbers, are pointing in the same direction.
The conventional treatment, repeated in the wire copy that recycles the press release, is that the gap is a methodology puzzle: economists have noted that consumer sentiment has been less predictive of how Americans actually shop since the pandemic. Americans keep spending. The mood stays poor. The two are not moving together. The “anomaly” framing treats this divergence as a measurement problem.
It is not a measurement problem. The transmission mechanism is working exactly as documented in the institutional record. The Federal Reserve’s Distributional Financial Accounts, the most comprehensive publicly available tabulation of U.S. household wealth by percentile, show the top 1 percent of households holding roughly 30 percent of household wealth in the most recent reading, against approximately 23 percent in 1989. The bottom 50 percent holds about 2.5 percent. The top decile holds more than half of all direct and indirect equity. The bottom fifty percent holds virtually none. The Saez-Zucman series updated through 2024 places the top 1 percent’s income share above 20 percent — among the highest readings in the post-1917 series. Real wage growth for the bottom three deciles has run below the rate of consumer-price inflation across the 2021–2025 period. Stock-market wealth, by contrast, has roughly doubled since the end of 2019, concentrated in the upper half of the wealth distribution.
The Conference Board’s index asks households about business conditions, employment, and income expectations over the next six months. The University of Michigan’s index asks about personal finances, buying intentions, and economic expectations over the next one and five years. Both indices weight the respondent’s reported expectations, not their balance sheet. The household reading the questions sees gas at the pump, rent at the lease renewal, grocery bills, the visible cost of the credit-card statement. The household does not see the S&P 500 close.
Gas prices climbed above four dollars a gallon earlier this year on the Iran war’s oil shock, accelerating the Consumer Price Index before receding modestly in June. The nominal wage gains recorded in the Bureau of Labor Statistics employment reports did not recover the purchasing power lost to the oil shock; real average hourly earnings fell over the past year because inflation consumed the nominal pay increases. The June uptick in confidence is attributed to falling gas prices. The cumulative real-wage deficit remains unaddressed. The asset-owning class has seen its portfolio valuations reach record highs. The wage-earning class has absorbed the inflation impulse.
Spending held up because households drew down pandemic-era excess savings, took on additional credit-card and auto-loan debt at rates not seen since the 2008 period, and absorbed inflation through the mechanism the Survey of Consumer Finances documents as the working-class default: reduced real consumption, deferred maintenance, and substitution to lower-cost goods. The “kept the economy growing” framing treats the spending as evidence of consumer confidence, when the underlying data show it as evidence of consumer depletion. The aggregate macroeconomic data masks the transfer.
The wonk-laundering operation is the move from “household mood and headline indicators diverge” to “household mood is no longer predictive, so the headline indicators are the real story.” The first sentence is a finding. The second sentence is a laundered version of the first sentence. The first sentence is a distributional finding: when the gains from growth go to the top of the distribution and the costs of inflation hit the median household, the median household’s mood falls. The second sentence is the post-2020 cover for that finding.
The institutional response has been to document the divergence rather than reverse it. The Federal Open Market Committee at its August 2025 meeting reversed the 2020 flexible average inflation targeting framework, returning to a symmetric two-percent target. The reversal arrived after the inflation impulse had already cleared the working-family balance sheet. Equity valuations and household sentiment now occupy entirely separate registers. The “soft landing” is the consensus economic-press narrative of 2024–2025, built on the disinflation of 2023–2024 and the unemployment rate’s failure to rise. It treats the headline numbers — GDP growth, unemployment rate, CPI, the S&P — as the economy. The household mood is treated as a separate phenomenon, to be explained by post-pandemic behavioral change, political polarization, or measurement noise. The distributional data is omitted from the explanation.
The bottom half holds wages and cash deposits. Inflation is the tax on those holdings. The score is the score. The methodology of the indices has not changed since 2019. The household mood has changed because the household economy has changed. A functional dual mandate requires the Federal Reserve to score the distributional incidence of its rate-setting operations across income lines, not merely against an aggregate price index. When the next oil shock arrives — and the geopolitical architecture of the Iran war guarantees it will — the monetary transmission mechanism will once again extract the purchasing power of the wage-earning class to defend the portfolio valuations of the asset-owning class. The right read of the 91.2 and the 44.8 is not “what’s wrong with the indices?” It is: what does it tell us that both indices, built differently, point in the same direction? The methodology did not fail. It captured the distributional reality the press chose to ignore.