American Consumers ‘Upbeat’ Spending; Californians Not So Optimistic

Last week we reported “It’s The Economy, Stupid’ – And It’s Robust,” explaining that Retail sales were higher than expected in August despite higher prices on gasoline and other goods; The Trump economy has delivered record low child and Hispanic poverty rates; Median household income also hit a record high of $87,460; unemployment claims dropped to 196,000; the economy is growing at 5%, up from 4.4 percent on September 10; and even that women’s earnings are now higher than ever AND the pay gap is now lower than anytime in history.

I also explained that while the U.S. economy is robust, the California economy has some serious issues that everyone is feeling.

With the recent Fed interest rate increase, the average 30-year mortgage rate last week increased to 7.28%. And the ignorant media immediately declared that the economy is tanking. But, as the Wall Street Journal correctly reports, “They are a sign of a healthy and strengthening economy.”

Anyone who tried to buy a car or home in 1980 remembers the 16%-18%interest rates. The early 1970’s ushered in real interest rate pain at 16.4% .

Bankrate reports, “Over the past four decades, the 30-year fixed rate ranged from a 2021 low of 2.65% to a 1981 high above 18%.

The average 30-year fixed rate bottomed in 2021 at just under 3%.”

Today’s 7.28% feels more like a return to normal.

WSJ reports:

The real risk isn’t that the housing market will collapse because fewer people can afford homes, but that housing regulators relax underwriting standards to help borrowers take out bigger mortgages than they can afford. This is what the Biden team did when mortgage rates rose in 2022, which merely fueled higher prices and taxpayer risks.

The press presents the current 30-year mortgage rate as a historical aberration. It isn’t. Millennials may not recall a time when rates were as high. For most of their adult lives, rates ranged between 2.5% and 5%. But that was the aberration.

All of this factors in to the overall health of the U.S. economy. But it will likely take another year for recovery, as it did for President Ronald Reagan in his first administration. The “Reagan Economy” did not kick in until 1982, primarily after the midterm election in 1982, when Democrats gained 26 House seats, but retained a majority in the House. Republicans held the Senate at 54 seats.

What cannot be discounted is the average private-sector paycheck has grown faster than prices since President Trump took office, while the four years of the Biden administration the paycheck shrank after inflation. And in recent months, real pay is growing even faster, Breitbart reports.

“Americans are spending more on food, travel, couches, Halloween decor and most anything else they want or need—pushing through inflation and their own gloomy feelings about the economy,” the WSJ says in an article aptly titled, The Mighty American Consumer Is Crashing Through Inflation and Driving Growth. “Decisions like that across the economy show America’s appetite for consumption is expanding.”

Americans are spending according to the Bureau of Economic Analysis data released September 30, 2026, in the Personal Income and Outlays report for August, and that is a good thing.

“Upbeat spending is particularly remarkable because it seems to contradict downbeat consumer sentiment,” the WSJ explains. Even if consumers are spending faster than disposable income, it shows optimism in the economy and the future – people ar willing to take on a little debt.

“Wages are now growing at about twice as fast as home prices,” the WSJ says. “If this trend continues, Americans will be able to save more for down payments and buying a home will become more affordable.”

While California has a distinctly worse unemployment rate than the U.S. average at 5.1% – the highest of any state – a severe housing and cost-of-living problem, a fragile and volatile budget, and ongoing net domestic outflows of people and business headquarters, California’s GDP and output has been good. The UCLA Anderson Forecast’s September outlook reported first-quarter 2026 GDP growth of 3.7% annualized, versus 2.1% nationally, and year-over-year growth of 3.3% versus 2.7%. The state has been helped by AI-related investment, and it’s the tech industry primarily bolstering California’s economy.

That outperformance through has not translated into a strong labor market.

California’s labor and household picture is weaker. Unemployment was 5.1% in August and has stayed above 5% for more than two years. UCLA describes an ongoing “employment recession,” with total employment expected to edge down in 2026 and recovery not starting until early 2027, with predicted unemployment averaging about 5.2% this year, then 4.9% in 2027.

A California household survey showed fewer people employed and a smaller labor force over the same period tech hiring has been contracting. Housing construction remains constrained by mortgage rates, material costs, and labor.

Recent “hope” signals have not lifted confidence. Conference Board data showed California consumer confidence plunging 35% in September to its lowest level since 2013, tied to elevated gas prices, a self-inflicted wound by the state’s high gas taxes. California’s gas prices remain $2.00 per gallon higher than the rest of the country. 

Just imagine what the California economy would do if Democrats and the governor suspended the gas taxes… If Steve Hilton is elected Governor, he said he  would:

• eliminate extreme environmental program costs, which add about 54 cents per gallon to gas prices
• suspend the Low Carbon Fuel Standard (LCFS), reformulation requirements, which add roughly 40 cents per gallon
• eliminate the 60 cents per gallon state excise tax
• add additional deregulation measures, including immediate steps to increase California oil production
• suspend enforcement of SBX1-2 and ABX2-1, which could reduce prices even further, by up to 25¢ per gallon.

Sounds good to me.

Gas prices today:

National Average: Gas: $4.37 per gallon; Diesel: $6.31

California: Gas: $6.38; Diesel: $8.36

Arizona: Gas: $4.74; Diesel: $6.23

Texas: Gas: $3.90; Diesel: $5.73

Louisiana: Gas: $3.93; Diesel: $5.84

Florida: Gas: $4.15; Diesel:” $5.90

Ohio: Gas: $3.78 per gallon!