But the ever-reliable consumer is beginning to look shaky, courtesy of an unpleasant mix of a stagnating job market and sticky inflation.

Beth Hammack is the president and CEO of the Cleveland Fed, and a member of the Federal Open Market Committee (FOMC), which makes the all-important decisions about America’s base interest rate.

Hammack spent much of her career on Wall Street with Goldman Sachs, latterly serving as co-head of the global financing group and a member of the management committee—and as such still keeps a close eye on financial markets as a barometer of the economy’s health. While financial markets aren’t the real economy, Hammack said markets act as an “important signal for businesses that they consider when they’re thinking about raising capital and thinking about whether or not they want investments.”

The picture looks bullish, Hammack told Squawk Box Europe this morning: “What I’m reading in the markets right now is a market that’s not anticipating any sort of a material drawback … Valuations do look to be pretty full, I think there’s good optimism about earnings, about corporate profits, how that’s going to continue to play out, and it looks to me like markets are expecting that we will continue to see robust demand on the consumer side, and the consumer will continue to hold up reasonably well which will give us a stronger GDP and keep the economy ticking along the way we want it to.”

The optimism Hammack outlined has pushed the S&P 500 to a record high of above 6,600—with analysts expecting that figure to push higher later in the year.

Confidence is faltering

Hammack didn’t comment on whether or not the market’s assumption was correct.

Data pertaining to consumer confidence isn’t the healthiest—in fact it’s been steadily dropping off this summer. The U.S. Index of Consumer Sentiment (ICS), calculated by the University of Michigan, establishes shopper sentiment courtesy of a random survey of American households. At the beginning of the year, it sat at a little under 72 basis points, but come September 2025, had fallen to to 55.1—a drop of more than 20% compared with a year ago.

Likewise the Conference Board’s consumer confidence barometer for September will be released tomorrow, but was already showing the beginning of a dip in August. Last month it fell 1.3 points to 97.4—compared with a baseline of 100 benchmarked to 1985. The main reason for this drop, according to Stephanie Guichard, senior economist of global indicators at the Conference Board, is consumers’ appraisal of current job availability, which declined for the eight consecutive month.

Jobs data has been coming back more weakly than hoped. While unemployment is hanging steady at 4.3%, the market added a measly 22,000 jobs in August, meaning that while little firing is happening (keeping the unemployment rate steady), little hiring is happening, too.

Compounding the issue of a tight jobs market, where consumers feel they may struggle to get a job or move into a better-paying role, is the issue of tariff-induced inflation. While the Fed has been urged—and has indicated it will—“see through” tariffs as a one-off hit to prices, consumers will still have to pay their way through the spike.

Guichard noted: “Consumers’ write-in responses showed that references to tariffs increased somewhat and continued to be associated with concerns about higher prices. Meanwhile, references to high prices and inflation, including food and groceries, rose again in August. Consumers’ average 12-month inflation expectations picked up after three consecutive months of easing and reached 6.2% in August—up from 5.7% in July but still below the April peak of 7.0%.”