•People's economic sentiment shifted for the worse following the COVID-19 outbreak.•Unemployment-related sentiment shifted more strongly than in the Great Recession.•Shifts were substantially larger in those countries hit hardest in economic terms.•Contrary to the Great Recession, short-time work schemes did not ease sentiment.•Coinciding slowdowns in European labour markets and consumption are observed. The COVID-19 pandemic has inflicted an economic hardship unprecedented for the modern age. In this paper, we show that the health crisis and ensuing lockdown, came with an unseen shift in households’ economic sentiment. First, using a European dataset of country-level and regional internet searches, we document a substantial increase in people's business cycle related searches in the months following the coronavirus outbreak. People's unemployment concerns jumped to levels well-above those during the Great Recession. Second, we observe a significant, coinciding slowdown in labour markets and consumption. Third, our analysis shows that the ensuing shift in sentiment was significantly more outspoken in those EU countries hit hardest in economic terms. Finally, we show that unprecedented fiscal policy actions, such as the short-time work schemes implemented or reformed at the onset of the COVID-crisis, however, have not eased economic sentiment.