The US economy has been an enigma in recent years. The job market is booming and consumers continue to spend, which is usually a sign of optimism. But if you ask Americans, many will tell you that they feel bad about the economy and are unhappy with President Bidens economic record.
Call it the vibe session. Call it a mystery. Blame TikTok, media headlines or the long shadow of the pandemic. Gloom prevails. The University of Michigan’s consumer confidence index, which looked a little sunnier this year after a significant slowdown in inflation through 2023, has worsened again. And while a sentiment measure produced by the Conference Board improved in May, the poll showed expectations remained shaky.
Negativity may end up mattering in the 2024 presidential election. More than half of registered voters in six battleground states rated the economy as poor in a recent poll by The New York Times, The Philadelphia Inquirer and Siena College. And 14 percent said the political and economic system should be completely destroyed.
What is going on here? We asked prominent government officials and analysts from the Federal Reserve, the White House, academia and Internet commentaries about what they think is going on. Here is a summary of what they said.
Kyla Scanlon, creator of the term Vibecession
Price levels matter and people are also getting some facts wrong.
The most common explanation for why people feel bad about the economy brought up by every person interviewed for this article is simple. Prices jumped a lot when inflation was really fast in 2021 and 2022. Now they’re not going up as fast, but people are left grappling with the reality that rent, cheeseburgers, running shoes, and day care all cost more.
Inflation is a pressure cooker, said Kyla Scanlon, who this week will publish a book titled In This Economy? that explains common economic concepts. Over time it hurts. You’ve had a few years of pretty high inflation and people are really dealing with the consequences of that.
But Mrs. Scanlon also pointed out that knowledge gaps may be part of the problem: A Harris poll for The Guardian this month found that most Americans (wrongly) believed the United States was in a recession. About half said they believed the stock market was down from last year, although it has risen sharply.
Yes, there is economic frustration, but these are objectively verifiable facts, she said.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta
Part of this has to do with memory.
A big question is why when the economy is growing, unemployment is historically low and stock prices are rising things feel so bleak.
When I talk to people, they all tell me that they want interest rates to be lower and they also tell me that prices are too high, Raphael Bostic told reporters last week. People remember where prices used to be and they remember not having to talk about inflation, and that was a very comfortable place.
God. Bostic and his colleagues at the Fed have raised interest rates to the highest level in more than two decades in an effort to curb rapid price growth, and he said the key was to get inflation back to normal quickly.
Jared Bernstein, CHAIRMAN of the White House Council of Economic Advisers
Catching inflation takes time.
As inflation cools, there is some hope that the negativity may fade. Jared Bernstein noted that for the past 14 months, middle-class wage growth has outpaced inflation and predicted that people would feel better if wages caught up with higher prices.
If that were wrong, everyone would be walking around eternally pissed off that gas isn’t $1 a gallon, mr. Bernstein said. The two components of this adjustment are time plus rising real wages.
Loretta Mester, President of the Cleveland Fed
Wages have stagnated.
But not everyone is broke even at this point, and that may be part of the explanation behind the persistent pessimism. On average, wage gains haven’t quite caught up with price increases since the start of the pandemic, if you compare increases in the Consumer Price Index to a measure of wages and salaries that Fed officials watch closely.
They still haven’t made up for all the lost ground, Loretta Mester said. They are still in a hole, a bit.
mrs. Mester noted that people are also struggling to afford homes because prices have risen in many countries and high interest rates are making first-time home ownership difficult, making that part of the American dream out of reach. for many people.
Lawrence H. Summers, Harvard economist and commentator
Interest rates are part of the issue.
This touches on an issue that Lawrence H. Summers recently raised in an economics paper: To most people, the higher interest rates the Fed is using to slow demand and dampen price growth feel like another form of inflation . In fact, if high interest rates are added to inflation, it explains much of the gap between where consumer confidence is and where it might be expected to be.
The experienced cost of living is much higher than inflation as reflected by the Consumer Price Index, Mr. Summers said in an interview. He noted that consumer confidence improved when market-based rates, which feed into mortgage and rental costs, eased earlier this year, then eased again as they rose.
Charlamagne Tha God, radio host
People remember more comfortable times.
Whatever is causing the resentment seems to be translating into negativity towards Mr. Biden. In a recent Times poll, many said they thought the economic and political system should be changed, and fewer said they thought Mr. Biden, compared to former President Donald J. Trump, would bring big changes.
Charlamagne Tha God recently suggested on The Interview, a Times podcast, that black voters in particular could be turned on by Mr. Biden and to Mr. Trump because they associated the former president with the last time they felt financially secure. God. The Trump administration sent two rounds of stimulus relief checks, which Mr. Trump signed. God. Biden sent one, which he didn’t. And inflation started to rise in 2021, as Mr. Trump left office.
People are living paycheck to paycheck, Charlamagne said during a follow-up interview specifically about the economy. You don’t know struggle until you have to decide whether to make your car payment or your rent.
According to him, rents have risen drastically since before the pandemic, and car loan delinquencies are rising sharply. While inflation and higher interest rates have been a global phenomenon, people tend to blame the current economic challenges on whoever is in office.
People can’t see past their bills, Charlamagne said. All we want is increased mobility and security, and whoever can provide that, even for a brief moment, you never forget.
Susan Collins, president of the Boston Fed
People are worried after the pandemic.
In fact, the recent economy has provided something of a split screen: some people are doing really well, seeing their retirement portfolios improve and their home prices rise. But those people were often already good. Meanwhile, people carrying credit card balances are facing much higher fees, and many Americans have depleted whatever savings they managed to accumulate during the pandemic.
There are groups that are doing really, really, well, and there are also groups that are struggling, said Susan Collins. We talk to individuals who are having a lot of trouble making ends meet.
But she also noted that the period since the pandemic had been fraught with uncertainty. Changes in interest rate policies, years of inflation, and headlines about war and geopolitical turmoil may have shaken the way people view their economic situations.
I think there’s another level of post-pandemic anxiety that’s hard to rule out, Ms. Collins said.
Aaron SOJOURNER, WE Upjohn Institute
Some of this may be related to environmental negativity.
However, there is an enduring mystery about vibecession. People tend to be more optimistic about their personal economic situation than about the economy as a whole.
That may be because Americans rely on the media for their perception of national economic conditions, and news sentiment has grown worse in recent years, said Aaron Sojourner, who recently wrote a study suggesting that economic news coverage it has become more negative since 2018, and much more negative since 2021.
For the past six years, the tone of economic news has been significantly more sour and negative than would be predicted based on macroeconomic variables, he said.
But he acknowledged that reporters have taken real-world experiences and consumer sentiment data into account in their reporting, so it’s hard to know to what degree bad vibes are driving negative news and how much negative news is driving bad vibes.
Does the sentiment cause the news, or does the tone of the news cause the sentiment? I don’t know Mr. Sojourner said.
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