“The 360” shows you diverse perspectives on the day’s top stories and debates.
According to recent polls, the vast majority of Americans think the U.S. economy is awful right now.
But the vast majority of experts beg to differ — and as evidence they cite the latest economic indicators on growth, prices, wages, spending, employment, debt and wealth.
It’s one of the oddest economic disconnects in recent memory.
On one side, economists are patiently explaining that joblessness is extremely low; inflation has abruptly cooled; GDP is growing at its fastest pace in years; a long-predicted recession is looking increasingly unlikely; and people (of all ages and income levels) are making, spending and accumulating more money than before the COVID-19 pandemic.
And yet Americans have been telling pollsters “by huge margins” that “they believe inflation is still rising (it’s falling), that it has outstripped wage growth (wages have outpaced prices) and that they have become less wealthy (they’ve become much wealthier),” according to Financial Times data journalist John Burn Murdoch.
Consequently, three-quarters of U.S. adults now describe the economy as poor. Two-thirds say their household expenses have risen over the past year but only about a quarter say their income has increased over the same period. Consumer confidence has slipped to a six-month low.
Why there’s debate
The gap between numbers and “vibes” has puzzled policy makers, pundits and especially the White House political team, which is relying on an economic rebound to propel President Biden to a second term.
But the debate becomes a little clearer when you consider how rising prices are unique among big economic problems — more visible, visceral and enduring.
Due to pandemic-era disruptions — and to a lesser degree COVID stimulus under both the Trump and Biden administrations — inflation peaked at 9.1% in June 2022, the highest level in four decades.
Today the rate of price increases is much lower (about 3%, close to the Federal Reserve’s 2% target). But stuff is still a lot more expensive than it was before the pandemic, so it’s no wonder few consumers are prepared to praise the U.S. economy just yet. In general, nothing makes people feel gloomier — even if most of them do have jobs and a bit more money in their pockets — than sticker shock.
Still, most countries experienced steep inflation during the pandemic. In Europe, however, economic sentiment now matches economic performance. Only Americans are expressing a disproportionate sense of doom. So other factors are also at work — and the debate is likely to continue even as inflation tapers off.
After the recession of the early 1980s, it took about a year for then-President Ronald Reagan’s approval rating to recover — and it recovered slowly, at the rate of about one percentage point per month. President Barack Obama’s approval numbers took even longer to bounce back after the financial collapse of 2008-09.
It’s possible that a gradual upswing still awaits Biden, whose rating on handling the economy stands at 34% approve, 59% disapprove, in the latest Yahoo News/YouGov poll.
But it’s also possible that some big differences between the past and the present — more extreme partisan polarization; more biased information bubbles on social media; more expensive housing, health care and higher education — will keep the bad economic vibes going well into the future.
Most Americans are better off now than in 2019.
“The majority of Americans are better off financially now than they were before the pandemic. Full stop. Not every American, but the majority. That’s true across demographic and income groups." — Former Federal Reserve economist Claudia Sahm, Stay-at-Home Macro
Pay attention to strong consumer spending.
“Consumer spending rose 0.2 percent, after accounting for higher prices, in October, the most recent month for which the government has data. Online shopping jumped 7.8 percent over the Thanksgiving long weekend, more than analysts had anticipated. The sales of new cars, dishwashers, cruise vacations, jewelry — all things people tend to give up when they are watching their budget — remain strong. … People hate inflation, just not enough to spend less.” — Annie Lowery, the Atlantic
Higher spending doesn’t mean people are happy about higher prices.
“When inflation ‘goes away,’ that doesn’t mean that every price reverts back to its previous level. For the most part, the rate of price increases just levels off. Anyone pissed off about prices at the grocery store is still going to be pissed off, because they’re still high relative to where they were in 2021. … Meanwhile, interest rates have remained at levels mostly unseen in the past couple of decades.” — David Dayen, American Prospect
It’s hard to feel like you’ve ‘made it’ when everything costs more.
“What if full employment — meaning a labor market firing on all cylinders — … just isn’t that popular? ... It can feel almost more frustrating that your job is finally paying you well, you’re in the spot you wanted to be in, and you still can’t afford things easily. Gas and groceries remain a pain. You finally got to take that vacation, but it was more than you expected to pay, and the service at the hotel was dismal. Moreover, full employment does not address how prohibitively expensive some major pillars of our economy are — health care, child care, higher education, housing. ‘Making it’ in America today doesn’t feel very made.” — Emily Stewart, Vox
Social media is amplifying angst — particularly among young people who lean left.
“There is at least some evidence that the digital world is painting a bleaker picture than the statistics support. Brendan Gahan, a digital marketing consultant, said that data from TikTok shows conversation around #economycollapsing reached a fever pitch this past month and generated tens of millions of views — even as inflation markedly cooled. … 'We live in a reply guy world, and dunking on people [including the president] is what’s going to get even more engagement, and more engagement equals more money,' [another consultant] said." — Jeff Stein and Taylor Lorenz, Washington Post
Partisanship is also playing a big role.
“The share of Americans who call their own finances good is now about twice as big as the share who call the economy good. … In other words, a growing number of people say their finances are fine, but the economy as a whole is bad. Who are those people? NORC found that 82% of Republicans who call their personal financial situation good view the economy poorly. Only 38% of Democrats with good personal finances say the same.” — David Lauter, Los Angeles Times