McDonald's Reveals Americans Have Hit Their Breaking Point

Added: 2026-05-11

[00:00:00]Today, the CEO of McDonald's said, "The current consumer environment is, in his words, certainly not improving and maybe becoming a little bit worse." That was after the company reported better than expected past results. Those from mainly before the full weight of the energy shock. Now over in big ticket items and appliances, Whirlpool, the the employer of the May tag man, they compared the current environment to not joking 2008 and 2009 as the cracks of demand destruction get to be even wider and becoming even more noticeable. I mean somewhere the May tag man is off polishing his resume. Now what Mark Bitser who's the CEO of Whirlpool said was quote this level of industry decline is similar to what we've observed during the global financial crisis and even higher than during other recessionary periods. As Mr. Bitser points out demand for appliances largely stable in normal conditions. So when the company the rest of industry saw what happened in March and April they immediately went to Defcon 1. That's where the real setback from the energy shock will be setting in. McDonald's. Sure. People cutting back on eating out, travel, vacation, those are part of it. But when it gets really serious, what happens is especially workers who are threatened by the job market and unsure of their household situation, they cut back on big ticket purchases, especially anything which needs to be financed regardless of interest rate. So appliances are already there and even before the gasoline price spike, the housing market stumbled with home prices falling in February across the entire US, which points to serious stress just from jobs before we get to $5 gas. Now McDonald's, as we talked about before, they were already responding to those previous consumer wos by going back into their value menu concept. But now with gasoline prices on the rise, despite the fact that oil futures costs are down a little bit here in the short run, the strain on the consumer economy, especially for lower income consumers and younger Americans, is going to be enormous and enormously unbearable.

[00:02:05]The challenging consumer environment is back on the menu at McDonald's, or at least for the company management's conference call earlier today. Now remember, the restaurant chain had thrown in the towel on the idea of a 2026 recovery a couple of months ago when it resurrected the value meal deals, effectively lowering prices for hard-pressed fast food fans. At the time, CEO Chris K promised McDonald's is quote not going to get beat on value and affordability. And he largely delivered with quarterly results since then proving the economic reality that for most people bears no resemblance to the narrow NASDAQ advance. However, as Chris K himself was forced to admit in his latest quarterly update earlier today, there are things that you can control like what you charge your customers. And then there is the dreaded challenging consumer environment. Quote, McDonald's on Thursday reported quarterly earnings and revenue that beat analyst expectations as diners spend more at its US restaurants even in what CEO Chris K called a challenging environment. Shares of the company initially rose more than 3% in pre-market trading, but the stock lost some of its gains as executives raised new concerns about the current consumer environment. The shares were slightly higher in morning trading. I think probably it's fair to say that it's certainly not improving and it may be getting a little bit worse, Chris Kay said on the company's earnings conference call when he talked about this consumer environment. So, what started out happy as a happy meal quickly deteriorated into uhoh, we cut prices. But since gasoline has soared so high, consumer spending may be getting a little worse than it had been when it forced us to cut prices to begin with.

[00:03:45]The stock, which was up 3%, is actually now down 1% because outside of a few stocks in the various stock indexes, stock investors are neither loving it nor buying it. And for the record, McDonald's shares peak on February 27 at 341 bucks. and are now trading at just 283, lowest in over a year. Before we go on with our video today, let me ask you a question. What if your gold could actually pay you every single month in more gold? That's what today's video sponsor, Monetary Metals, lets you do.

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[00:05:15]As I said in the beginning, the real stress starts to show up not just when consumers tighten their belts a little, when they really start to pull back from especially big ticket purchases. And of course, appliances, they absolutely qualify as big ticket and they absolutely qualify as consumers are really pulling back. And according to the world's leading appliance maker, it is not good to put it kindly. CEO Mark Bitser, he put it into the 2008 2009 category. Here's what he said in a company conference call. Stunning listeners and the media and of course the market this morning. Quote, "The US appliance industry demand declined 7.4% in the first quarter with March being down 10%. This level of industry decline is similar to what we have observed during the global financial crisis and even higher than during other recessionary periods. Keep in mind that we're operating in an environment where duress replacement demand drives more than 60% of the industry and this part of the demand is relatively stable. This gives you a sense of just how dramatic the impact on discretionary demand was.

[00:06:22]While Bitser did go on to say March's minus 10% collapse was, in his words, an outlier, he also said they don't anticipate a recovery from it. In other words, sales crash right away. And while they might not crash anymore, at least that's what they're hoping, they're not going to pop right back up either.

[00:06:39]However, I'd caution that like McDonald's Chris K, there's some softening in the language and careful optimism and the outlook and the message. After all, we haven't seen the full shock from the gasoline prices yet, nor the myriad other challenges which have yet to show up either, like in the labor market. Imagine gasoline at $5 a gallon retail nationwide average, which is largely baked in at this point regardless of what happens with hormuz and news about the straight in the short run, which I'll get to in just a minute.

[00:07:08]So, five bucks for gas, a few more employers cutting jobs, even less hiring, incomes that weren't enough in February are nowhere close to enough now. And if appliance demand can crash by 10% in March, is that really an outlier? After all, as Bitser himself pointed out, consumer confidence was already in the toilet before we got to any of this. And that last one is a major point, one that is completely unnoticed, if not entirely unappreciated. To this day, most people can't figure out why socialism, for example, is so popular, especially among younger adults. Well, we're sitting here explaining what this all adds up to, what it really means. You've got an economy that's that sucks for the most people in it. At the same time, the stock market, at least stock indexes, continue to sore. Life becomes increasingly harsh and unbearable in the mid 2020s. So, what else would you think it is? I mean, socialism's gotten to be so popular to the point it's being accepted more and more by voters, at least in certain places like large cities across the country. And I'm going to say it again. The biggest mistake is mistaking the stock market for anything real. Stock indexes in particular, they only represent how much retirement money is being allocated to the asset class.

[00:08:23]That's it. They tell you nothing about the state of anything outside the New York Stock Exchange. If you think record stock indexes mean the economy is just fine, just sit back and watch as the country's youth will continue to migrate toward darker extremes. So to give you an example, in a poll just released by Generation Lab taken at the end of April, so after the ceasefire, it found that just 2% of young adults, those who are under the age of 35, thought the economy was excellent. Two, just two.

[00:08:53]And only 16% said it was even good. So that leaves a whopping 29% of the survey rating the economy as terrible, more than excellent and good combined with a few percentage points to spare. And then the majority, 52% believe the economy is bad. So eight in 10 think either bad or terrible. And these are young adults. So even though polls aren't precise instruments and yes, they can be skewed often purposely. However, the scale of these numbers shows the very likely very real skew in what young adults are really thinking about the economy and how it impacts them. This has nothing to do with the prices of a few stocks and stock market indexes. It has everything to do for Whirlpool, McDonald's, and a hell of a lot more as gasoline creates even bigger hole in an already stretched consumer budget. For younger adults who are hardpressed by years of inadequate job opportunities on top of student debt, and now what incomes they have managed to scrape up, just aren't nearly enough to scrape by to the point they can only eat at McDonald's when the price of cheap hamburgers is made a lot cheaper. Forget anything like a house with a bunch of new appliances in it.

[00:10:02]Even the CEOs refuse to come out and speak the full truth here. Chris Kay talking about the challenging consumer environment. More corporate buzz speak.

[00:10:09]It's a lot more alarming than challenging when only two out of 10 young adults have anything positive to say about it. And even though oil futures have pulled back over the last couple days till they turned around this morning into this afternoon, gasoline prices are going to become even more uncomfortable. I went over in a video just a couple of days ago. Gasoline prices are on track for high $4, maybe even $5 per gallon, not just in California or other highcost states.

[00:10:40]Nationwide average $475,5 per gallon. And that just makes everything that we're talking about here even worse. Yeah, last check the front contract for WTI futures was just about $95 per barrel. Brent is still up around 100. Meanwhile, a wholesale gasoline RBOB, that one's around 345, 346. While that's off its recent high of 375, it still points to a nationwide retail gas pump cost of around 470 at the very least. So, as challenging as the consumer environment may have been in March and a bit more in April, the greatest challenge for consumers remains ahead of us. Gas, diesel, oil, they're going to be elevated for the time being.

[00:11:24]The only questions are really how high and for how long. Probably long enough, Whirlpool's inventory of May Tag appliances really starts to bulge more than it already has. And then what will Whirlpool do? Their input costs will be up, their sales down, inventory is huge.

[00:11:39]We all know what comes next at that point. Flatter beverage, which just adds another lay of crap on top of a crap economy. those remaining 2% in that poll we just went over who think the economy is excellent, they're going to be canceling the McDonald's orders after returning their new May Tag dishwasher back to the store. Now, the labor market, the real state of the labor market had a lot to do with more than just those poll results. After all, I mean, that's why McDonald's was cutting prices back in March to begin with, response to jobs and incomes. Consumer pessimism has been terrible for a long time because of fears over jobs and incomes. fears that became more and more reality. As we talked back in March, the fact that the Golden Arches and a bunch of other bigname companies like Pepsi were cutting prices even before the energy shock showed up, they had given up on the whole idea of recovery in 2026. Last year's big hole in the jobs market was chocked up to tariffs, or as economists call it, tariff uncertainty.

[00:12:34]It wasn't uncertainty, just like it wasn't trade wars. The downturn in the labor market began in 2024, if not late 2023. The data shows that job growth plunged to way below the minimum in 2024, showing again that the Japanese carry traders were way ahead of everyone else. Especially since in 2025, job growth disappeared completely. The massive US economy produced zero jobs or basically statistically zero jobs, just 180,000 for the entire year. I mean, that used to be a bad month. Last year, the bad month was all the labor market could get for an entire calendar year.

[00:13:11]And since therefore it wasn't tariffs or immigration enforcement or any of the other excuses have been thrown around, McDonald's, Pepsi, and all the rest of them were surprised when 2026 did not pick up like they were expecting, like they were told to expect. That's why they were all looking to save their business by finally accepting forgot how to grow reality and cutting prices. But the bad labor market wasn't entirely the lack of hiring. That was a big part of it, sure, but there has been a small and noticeable, especially to younger adults, a small noticeable uptick in layoffs and job cuts. And the latest data we got today on those from Challenger Gray and Christmas just add more evidence of the same challenging consumer environment. Quote, "US-based employers announced 83,387 job cuts in April, up 38% from the 60,000 or so cuts recorded in March.

[00:14:02]That's still down 21% from the 105,000 announced during the same month last year, but that was Doge. According to a report released Thursday from global outplacement and executive coaching firm Challenger Gray and Christmas, April's total is the third highest for April since 2009 with 105,000 job cuts in April 2025 and more than 670,000 in April 2020. In other words, outside of last April when Doge was actually a thing in April of 2020 for obvious reasons, April 2026 produced the most job cut announcements dating back to 2009, showing yet again the job market isn't catastrophic like 2009, but it is painfully bad. It is flat beverage and it is continuing to be. Here we are in April 2026. So what the economy needs, what families need is legit income growth and job opportunities to be able to climb out of their half decade hole.

[00:14:58]And it is just not coming. Then gas threatens to shoot to five bucks. And no wonder the appliance industry is screaming about their own 2009 comparisons. We should note, we should note here how a lot more companies are beginning to cite AI as a reason for the job cuts, if not the primary reason. But as I went over in a recent video too, these companies are largely lying about it. And the reason why is of course tied to their share prices to divorce those from reality even further. This even has a name these days. It's called AI washing. It should be called AI laundering for laundering a bad economy in a labor market. So while job cuts continue to slowly and painfully rise, hiring continues to be non-existent. So let's go back to Challenger. Quote, "Hiring plans fell 69% in April to just 10,000 from the 32,000 or so in March.

[00:15:49]They're down 38% from the 16,000 hiring plans announced last April. So far this year, employers have announced plans to hire just 60 a little less than 61,000 workers, which is down 13% from a roughly 70,000 new hires announced during the same period in 2025." And I love how they end their press release here with some of the most watered down conclusions you'll ever read. With a number of factors potentially impacting summer travel plans as well as how businesses operate across sectors, we predict hiring plans will remain muted.

[00:16:22]So through April 2026, somehow even less hiring than the first four months of 2025, a year when job growth entirely disappeared. Combine that with elevated job cuts, not crashing, not catastrophic, but elevated and painful nonetheless. and all that before we get to the full weight of $5 gas. Do you see it now? What does the stock market at the very least these narrow indexes at all-time high what do they have to do with any of this?

[00:16:55]We've already seen trouble brewing in the housing market even before we got to March. Home prices were down, yes, down, nationwide in February. And that's according to both the government sources and S&P K Schiller. Market activity has been held back by lack of income growth.

[00:17:10]Even though mortgage interest rates were declining throughout last year and by the end of February, they were down at multi-year lows. Did not matter because labor market misery did. No one wanted a big ticket house because the labor market was a miserable mess and getting worse. And that was when gas was $3 rather than $4, let alone $5. With five bucks really becoming a reality, we're going to really start seeing the cracks in the consumer economy and a lot more beside. They'll be there in small ways like in McDonald's, even though the chain had already cut prices, they didn't cut nearly enough for the conditions that we have right now. But the big one is big ticket housing market that was already a mess. No jobs, all that before we even get here. But for appliances, there wasn't even much of a margin. The bottom fell up pretty much from the get-go owing to the weak economy that was there in 2025 and was not being corrected in early 2026.

[00:18:06]So Chris Kay says the consumer environment worsened a little bit.

[00:18:09]Meanwhile, the May tag man, he's already got his resume posted on Indeed or what other job site that people used to use back when there used to be jobs. But now we don't even have those. Well, we are going to have $5 gas, so stay tuned.

[00:18:25]The parallel to the challenging consumer environment is of course private credit.

[00:18:29]And private credit is as much about insurance companies. And you got to see the latest comments on insurance from the inside. And that's in the video link below. As always, thank you very much for joining me. Huge thank you University members and subscribers. And until next time, take care.