In the heart of the U.S. retail sector, home-improvement giant Home Depot has long been viewed as a key indicator of consumer confidence and overall economic health. Its latest earnings report reflects how America’s middle class—the backbone of the economy—is tightening its belt and delaying major purchases. Economists say this is a clear sign of a white-collar recession.
It’s no longer just low-income consumers who are cutting back; more and more retailers say the middle class is also trying to save money. Home Depot’s customer base generally has stronger financial standing, and the company typically benefits when people are willing to buy homes or renovate them. But high borrowing costs, a sluggish housing market, inflation, and job insecurity have reduced Americans’ willingness to spend on their homes. Instead, their money is going toward necessities such as rent and groceries.
Home Depot’s fiscal 2025 third-quarter results show earnings falling short of expectations. Same-store sales in U.S. locations open for at least one year rose by only 0.2%. This is not a new trend. As early as August 2024, Home Depot warned that due to growing economic uncertainty, homeowners might delay renovation plans. That trend has continued into 2025, with declining foot traffic and weakening demand for big-ticket items like appliances.
High Inflation and Job Instability
A recent University of Michigan survey shows consumers’ one-year inflation expectations rising slightly to 4.7%. At the same time, the U.S. job market is facing a cold spell. In October, U.S. employers announced 153,074 layoffs, the highest for that month in over 20 years. Total layoffs this year have surpassed 1 million, a 65% increase from 2024. The University of Michigan’s Consumer Sentiment Index fell 6% in November to 50.3, the lowest since 2022.
Economists note that AI-induced job instability may disproportionately affect white-collar professionals, making retailers that depend on this consumer segment among the first to take a hit.
Foreign media commentators say that for a company long seen as a barometer of the financial health of American homeowners, Home Depot’s downturn is worrying. If even stable middle-class customers are spending less, the broader consumer economy may be headed for a colder winter than expected.
The Middle Class Has Essentially Disappeared
The warning signs extend beyond Home Depot. Retail analysts are sounding alarms about shrinking middle-class spending, with everything from home goods to non-essential purchases being affected. Consulting firm Alvarez & Marsal reports that middle-income households are changing deeply ingrained lifestyle habits, and many indicators suggest that the U.S. economy’s real challenges are just beginning.
In reality, the retail industry has long known that the middle class has essentially vanished. A survey by market research firm WARC on brand marketing strategies for 2026 shows that more than 70% of U.S. marketers believe the term “middle class” has effectively lost its meaning as income growth slows, living costs rise, and job security erodes. For brand marketing, only the high-end and low-end markets remain as viable targets.
