Economic Unease Lingers Beneath Surface Gains, Warns Top Economist
Intro
Today’s financial landscape is marked by a growing disconnect between headline economic data and the everyday experiences of most Americans. Diane Swonk, chief economist at KPMG, spoke with Fortune about the persistent unease that clouds economic sentiment, even as inflation appears to cool and markets remain strong. The reality, Swonk warns, is that only a small segment of the population truly feels secure—namely, high earners with significant investments—while the majority face ongoing financial pressures.
What Happened
Diane Swonk’s latest analysis shines a light on the “dirty truth” of the current U.S. economy: despite encouraging metrics on inflation and employment, widespread economic discomfort persists. According to Swonk, inflation is not surging but “creeping,” with subtle upward pressure on prices continuing to erode purchasing power. This gradual inflation, while less dramatic than in previous years, still accumulates over time, disproportionately affecting those without significant financial cushions.
Swonk points out that the only Americans largely insulated from this discomfort are those making more than $200,000 annually and those with large stock portfolios. These groups have benefited from robust equity markets and have the disposable income to absorb higher costs. For everyone else, wage growth has struggled to keep up with persistent increases in key expenses such as housing, healthcare, and everyday goods.
A closer look at the data reveals that, while certain economic indicators have improved, these gains are unevenly distributed. Consumer sentiment surveys continue to reflect anxiety about personal finances and the broader economic outlook, even as GDP growth and job creation numbers remain positive. Swonk characterizes this as a “creep instead of a surge” in inflation—a slow, grinding force that is difficult to shake off and easy to overlook in aggregate statistics.
Why It Matters
The disparity between economic indicators and lived experience has far-reaching implications. If only a small fraction of Americans feel financially secure, broader economic growth becomes fragile. Consumer spending, which drives much of the U.S. economy, may soften as more households pull back due to rising costs. Persistent unease can also fuel political and social tensions, influencing policy debates and electoral outcomes.
Furthermore, the slow, persistent nature of current inflation can be especially insidious. Unlike sharp spikes, creeping inflation is less likely to trigger immediate policy responses but can still undermine real incomes and savings over time. This dynamic risks deepening existing wealth gaps and eroding trust in institutions tasked with economic stewardship.
For policymakers and investors, Swonk’s warning is a call to look beyond headline numbers and address the underlying vulnerabilities that shape public sentiment and long-term stability.
Key Stats
- Households earning over $200,000 are most likely to report financial comfort, per Swonk’s analysis.
- Inflation has shifted from sharp spikes to a steady “creep,” with core prices rising incrementally month over month.
- Stock portfolios have rebounded significantly, benefiting wealthier Americans; the S&P 500 is up over 15% year-to-date.
- Consumer sentiment indexes remain subdued, with many Americans pessimistic about their personal financial future despite broader economic growth.
What’s Next
Looking ahead, economists and policymakers will need to grapple with the persistent disconnect between macroeconomic data and household-level realities. As inflation’s slow grind continues, the risk is that more Americans will feel left behind, potentially dampening consumer spending and complicating policy decisions. The Federal Reserve and fiscal authorities face the challenge of balancing headline economic strength with targeted support for those most impacted by rising costs. Meanwhile, the path of inflation and equity markets will remain critical variables to watch as the economy moves into the final months of 2025.