Inflation versus unemployment: what is strongly associated with U.S. consumer confidence over time?

We examine whether inflation or unemployment is strongly associated with U.S. consumer confidence and how these associations vary across different macroeconomic regimes. Using monthly data from January 2000 to May 2025, we estimate Ordinary Least Squares (OLS) models with regime-specific interactions, comparing headline inflation, core inflation, and inflation expectations with unemployment. The results show regime-dependent association patterns: core inflation became positively associated with confidence during the 2008–2009 financial crisis as falling prices coincided with weak sentiment, while unemployment exhibited relatively weak associations until becoming more pronounced during the post-pandemic adjustment of 2024–2025. In contrast, inflation expectations consistently showed strong negative associations with consumer confidence, particularly during the high-inflation period of 2022–2023. These findings indicate that the relative strength of the association between consumer confidence and key macroeconomic indicators varies across economic regimes, suggesting that policymakers should tailor communication and stabilization strategies to prevailing economic conditions while remaining attentive to changes in expectations and labour-market perceptions.