The economy still shows signs of life, but UBS says the labor market may decide how long consumers can keep carrying the load.

In remarks highlighted by Bloomberg, Abigail Watt of UBS pointed to an economic backdrop that may still support higher prices, even as uncertainty builds around jobs. That tension sits at the center of the current outlook. Businesses want to know whether demand can hold. Households want to know how much more they can pay. Right now, the answer appears to depend on whether spending stays firm as pressure builds elsewhere.

Key Facts

  • UBS says uncertainty in the labor market remains a key risk in the current economic environment.
  • Consumer spending is expected to stay somewhat stronger in the second quarter, according to Abigail Watt.
  • That spending outlook depends in part on the balance between rising gasoline prices and tax refunds.
  • Bloomberg reported the comments during a discussion on the economy's ability to support higher prices.

Watt said consumer spending should remain somewhat stronger in the second quarter, a notable point at a moment when many forecasters continue to watch for signs of fatigue. But that strength does not stand on its own. Rising gasoline prices threaten to eat into household budgets, while tax refunds may offer a temporary cushion. Those two forces could pull in opposite directions, shaping how much momentum consumers bring into the middle of the year.

The outlook for second-quarter spending looks firmer, but UBS says that strength hinges on whether tax refunds can offset the drag from higher gasoline prices.

The broader question goes beyond one quarter. If consumers keep spending, companies may find room to hold or raise prices. If labor market worries deepen, that support could weaken quickly. Reports indicate investors and policymakers alike continue to watch consumer behavior for clues about inflation, pricing power, and the durability of growth. In that sense, spending data now offers more than a snapshot of demand; it acts as a real-time stress test for the wider economy.

What happens next will matter well beyond retail receipts. If gasoline costs keep rising and labor market uncertainty grows, the consumer may lose some of the resilience that has helped steady the economy. If tax-related cash flow and job conditions hold up, spending could buy the expansion more time. The next round of data will show which force gains the upper hand — and whether this economy can still absorb higher prices without losing its footing.