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Some Americans live in a parallel economy where everything is terrible
Is the economy booming or busting?
Depends on who you ask.
Official data is positive: economic growth is solid, job market is strongand stocks maintain reaching records.
However, many Americans I think the economy stinks.
The last grim indicator is a Guardian-Harris Survey in which 55% of respondents said they think the economy is shrinking and 56% think we are in the middle of a recession.
Economic output, adjusted for inflation, grew a solid 3% during the most recent 12-month period. The unemployment rate is 3.9%. And the US economy created more than 3.5 million jobs in 2023.
Basically, you can’t have a recession when the economy is growing and employers continue to hire at that rate. But this Harris poll is not isolated.
A leading measure of small business sentiment is close to recessive levels. So there are some consumer confidence surveys. President Biden’s approval rating is in the tankalso, indicating that many Americans associate the poor economy they think we have with the job Biden has done as president.
The Guardian-Harris survey also found that 49% of respondents think the S&P 500 index has fallen this year. In reality, the shares are on the rise: the S&P 500 is up 13% this year in addition to a 24% gain last year.
Something seems wrong with the Guardian-Harris conclusion that half of Americans think the stock market is in decline. In a different survey, Gallup found that 62% of Americans own stocks, primarily through retirement and investment accounts. If this is true, wouldn’t most or all of these people know that their portfolios are gaining value?
The Guardian-Harris survey did not specify how many respondents own shares, but these two surveys appear to conflict. People know how much money they have and stock market investors are underrepresented in the Harris poll or overrepresented in the Gallup poll.
US President Joe Biden speaks about his Investing in America agenda at Gateway Technical College in Sturtevant, Wisconsin on May 8, 2024. (MANDEL NGAN/AFP via Getty Images) (MANDEL NGAN via Getty Images)
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Statistical anomalies probably explain part of the reason why polls show that people are extremely grim about an economy that is doing very well, but it would be a mistake to think that this is just a measurement problem. Or worse, thinking that many people are too stupid to know how good they are.
This is perhaps Biden’s main problem as he seeks a second term: convincing Americans that the economy is working for them, without talking down or appearing dismissive.
Inflation is obviously one of the main economic gremlins of the last three years.
Yahoo Finance’s Janna Herron recently explained how consumers consider the ideal level of inflation to be basically zeroconsiderably lower than Federal Reserve 2% Target.
The story continues
If zero inflation is ideal for most people, inflation that peaked at 9% in June 2022 served as a traumatic shock. Even the current rate of 3.4%, very close to the Fed’s target, is too high if your hope is that prices will never rise.
There is plenty of other evidence showing that Americans continue to feel hurt by prices that rose and stayed higheven though the annual rate of change is now more benign.
Another challenge for Biden is that many Americans are probably comparing the current US economy to the economy of 2019. On that basis, yes, inflation is worse now, gas prices are higher, and there are nerve-wracking wars in Europe and the Middle East. East.
Compared to the rest of the world, however, the US economy looks fantastic. No economy has emerged stronger from the COVID pandemic. Inflation, caused mainly by COVID-related supply chain confusion, has mainly emerged everywhere and has fell faster in the United States than in most other places. However, telling voters it could be worse is rarely a winning message.
It is also irrational to compare Biden’s economy with that of his predecessor, Donald Trump, who returns this year for another run at the White House.
There’s a good chance the economy would have looked more or less the same between 2017 and 2021 if Biden had been president instead of Trump. Same for the last three years if Trump were in office instead of Biden.
The factors that have changed the US economy in recent years are more influential than anything Trump or Biden have done.
Trump enjoyed a benign economic environment. And, most importantly, American shale energy companies were competing for market share with Middle Eastern oil drillers, which led to overproduction and low gas prices for consumers. On the other hand, Trump was hit by the COVID outbreak in 2020 and the madness of lockdowns and business closures.
Biden took office just as COVID vaccines were being rolled out, allowing for a gradual return to normalcy. But COVID disruptions have spawned the inflation that has been the bane of the Biden presidency.
Russia’s invasion of Ukraine in 2022 sent energy prices soaring, at a time when OPEC+ countries were cutting production and American drillers were focusing on profitability to the detriment of market share. All of this has driven up energy prices, contributing to a large part of the rising inflation in 2022 that still hangs over Biden’s economic record.
Another thing that might be bothering people is the end of the COVID stimulus.
In annual surveys conducted by the Federal Reserve, Americans reported their best financial health in 2021 – when the economy was still making up ground lost to the pandemic-related recession. The economy became progressively stronger in 2022 and 2023, but Americans said their financial situation deteriorated in each of those years as prices rose.
The maximum boost of $6 trillion in COVID-related stimulus for consumers and businesses occurred in 2021. When these programs ended, the “excess savings” that accumulated while people were stuck at home receiving stimulus checks dried up and essentially disappeared. . end of 2023.
So if Americans are comparing today’s economy to the economy three years ago, where the government was raining money down by helicopter, then yes, it’s a little more difficult.
Now, do the endless polls asking people their opinions on the economy matter at all? If Biden is re-elected in November, maybe not.
But if voters reject Biden, it will be clear that they have been signaling their displeasure for a long time. Even if the data is not fully backed up.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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