President Donald Trump spoke about the economy and the price situation for Americans during his annual State of the Union address on Tuesday, saying things have improved during his second term.
“Our country is back. Bigger, better, richer and stronger than ever,” he said at the beginning of his speech.
But many Americans don’t seem to feel that way. A January poll of more than 8,500 U.S. adults conducted by Pew Research found that about 72% of Americans rate the U.S. economy as “fair” or “poor.” According to the monthly University of Michigan Consumer Survey, overall consumer sentiment was down nearly 13% year-on-year as of February.
In his speech, President Trump cited falling inflation, job growth, tax cuts and a rising stock market as evidence that the economy is “better than ever” under his leadership.
Inflation was at an annual rate of 2.4% in January, down from 3% at the same time last year, according to the Bureau of Labor Statistics, and egg and gas prices fell 48% and 8%, respectively, from a year earlier, according to BLS data.
The unemployment rate was 4.3% in January, slightly higher than a year ago when it was about 4%, but still relatively low, according to the Labor Department. Employment growth was slow throughout 2025, but accelerated in January, with nonfarm payrolls increasing by 130,000. The S&P 500 index was up 16% at the end of 2025, indicating a strong year for the stock market overall.
However, despite these factors, many consumers still feel squeezed. Adjusted for inflation, wages have changed little since 2020, according to a January analysis by the Hamilton Project, a nonpartisan economic research group.
Heather Long, chief economist at Navy Federal Credit Union, said this discrepancy may be why Americans are so pessimistic about the economy, despite positive news such as a rising stock market and relatively low unemployment. The cost of necessities like housing and health care continues to rise, making it increasingly difficult for Americans to keep up or feel like they can get ahead.
“There is an ongoing affordability crisis in America, and it has been deepening for years,” she says. “The pandemic and ensuing inflation made the situation worse, but over the past year…it hasn’t really gotten better.”
“As the President made clear in the State of the Union, much remains to be done,” White House press secretary Khush Desai said in an emailed statement to CNBC Make It. He said his administration is working on policies that “put more money in the pockets of Americans.”
Consumer reaction
Consumer behavior generally shows signs of distress, experts say. Let’s take personal savings rates as an example. The average share of disposable income Americans spend lavishly fell to 3.6% in December, the lowest level since 2022, according to data from the U.S. Bureau of Economic Analysis.
“Many households are becoming more intentional about their regular expenses,” says Jovan Johnson, a certified financial planner and CPA who works primarily with small business owners. He says he has seen families take steps such as one spouse quitting their job to stay home and cut back on childcare costs.
“We’re also seeing an increase in meal prep and a noticeable decline in discretionary lifestyle spending, with things like boutique fitness memberships and upscale gyms often being replaced by more affordable options,” he says.
But some consumers continue to spend. According to BEA data, gross domestic product increased in the fourth quarter of 2025, driven by consumer spending. But much of that spending is driven by high earners, with a recent analysis by Moody’s Analytics finding that the top 20% of earners account for nearly 60% of all consumer spending in the United States.
Economists have dubbed this a “K-shaped” economy, in which higher-income Americans drive economic growth with continued spending while lower-income Americans are left behind.
But Long sees 2026 as a three-stage “E-shaped economy,” she said.
High-performing, high-income individuals, to whom retailers and credit card companies are increasingly catering by offering premium and luxury products. Middle-income earners who are “in trouble.” They’re still making ends meet on their bills, but they’re switching to discount retailers like Costco and wholesale retailers to stretch their money. Low-income people who rely on credit cards and “buy now, pay later” are trying to get by.
The tax refund, which Trump claims will be the largest ever, could help cover personal expenses and increase savings in the short term, Long said. As of Feb. 20, the average refund for individual filers was about $3,800, according to the Internal Revenue Service.
A February Intuit TurboTax survey found that of Americans expecting a refund, 44% said they planned to put at least some of it into savings, and 41% said they planned to use it for essentials. More than a quarter of those planning to save said they were saving because they were worried about their financial situation.
Long said tax refunds are only a “temporary solution” for people who have missed payments or struggled to save.
How to solve the affordability crisis
In his State of the Union address, President Trump called on Congress to take action on pending legislation to reduce housing and health care costs.
Lower prices could help ease the affordability crisis, but Long and other experts say wages need to rise and continue to outpace inflation to truly address the issue. “Unless we continue to see really, really strong wage growth, it’s going to be harder for people to pay their bills in full,” Long said.
Democratic leaders say the affordability crisis is far from over.
“When I was campaigning for governor last year, I heard the same pressing concern everywhere: It’s too expensive,” Virginia Gov. Abigail Spanberger said while laying out the Democratic response in Tuesday’s State of the Union address.
Sen. Elizabeth Warren of Massachusetts sent a letter to President Trump on Wednesday, saying the president’s characterization of the economy is “inconsistent” with the situation Americans are experiencing. She called on President Trump and his administration to provide evidence that his policies reduce costs for Americans.
“Despite your claims, you have not ‘solved’ affordability, nor have you ‘beat’ inflation,” she wrote. “Instead, prices for American homes have skyrocketed over the past year.”
While the government has some power to influence prices in certain areas, policy changes can also affect wage increases, something the average citizen doesn’t usually consider, said Heidi Schierholz, president of the Economic Policy Institute, a nonpartisan think tank.
“The public seems to believe that inflation is the fault of policymakers, but in reality that’s rarely true,” she told CNBC Make It. “The other side of that is the public. When asked in a survey, they take personal responsibility for what happens to their wages, for better or for worse.”
Strengthening labor laws, raising the minimum wage and improving social safety nets such as unemployment insurance are some ways governments can intervene to address the lag in wage growth, Schierholz said.
“Minimum wages aren’t moving quickly at the federal level,” she said, but added that many states have recently raised or are planning to raise their minimum wages. Other measures in Congress, such as the Protecting the Right to Organize Act, could help strengthen protections for unionizing activities, Schierholz said, but the law is unlikely to be passed soon.
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