This paper examines the relationship between consumer confidence, unemployment, and consumption spending in the U.S. economy, which has been mired in a slow recovery from the postwar period's deepest recession. It argues that consumer pessimism about unemployment explains a significant portion of the recent weakness in consumption. The paper introduces the "buffer-stock" model of saving, which posits that consumers hold assets to shield their consumption from income fluctuations, particularly unemployment. This model suggests that unemployment expectations play a crucial role in determining current consumption. The paper uses data from the University of Michigan's Panel Study of Income Dynamics (PSID) to estimate income uncertainty and solve the buffer-stock model. The results show that changes in the expected probability of unemployment have a major impact on current consumption and saving. The model also explains the "consumption/income parallel" and the increase in saving during periods of high unemployment fears. The paper concludes by analyzing puzzles such as the secular decline in the personal saving rate and the weak consumption growth in recent years.This paper examines the relationship between consumer confidence, unemployment, and consumption spending in the U.S. economy, which has been mired in a slow recovery from the postwar period's deepest recession. It argues that consumer pessimism about unemployment explains a significant portion of the recent weakness in consumption. The paper introduces the "buffer-stock" model of saving, which posits that consumers hold assets to shield their consumption from income fluctuations, particularly unemployment. This model suggests that unemployment expectations play a crucial role in determining current consumption. The paper uses data from the University of Michigan's Panel Study of Income Dynamics (PSID) to estimate income uncertainty and solve the buffer-stock model. The results show that changes in the expected probability of unemployment have a major impact on current consumption and saving. The model also explains the "consumption/income parallel" and the increase in saving during periods of high unemployment fears. The paper concludes by analyzing puzzles such as the secular decline in the personal saving rate and the weak consumption growth in recent years.