Right. There’s inflation. It peaked at 9% in June 2022 and is still elevated, at 3.1%. Some food prices have gone up and stayed up, and rent, yeah, it’s too damn high.
But sorry, this is not Venezuela or Zimbabwe. Inflation has come down remarkably fast, and most economists think it will be back near the preferred level of 2% or so later this year. Inflation is painful for families on a budget, but there’s no way an 18-month spate of price hikes explains why half of all Americans say they’re living in misery. Something’s off.
The words pollsters use are subjective, obviously. When the Times asked about the condition of the economy, there were four possible choices: “excellent” (which 7% of respondents chose), “good (19%),” “only fair” (23%), and “poor” (51%). There are three different ways people might think about this type of question.
First, they might think about the US economy compared with other advanced economies. But by those metrics we’re way ahead. The United States bounced out of the COVID downturn faster than any other developed nation. US GDP growth exceeded every other developed nation in 2023 and forecasts call for the same outperformance in 2024. We have problems — a huge national debt, a dysfunctional Congress, alarming addiction and gun-death rates — but so does everybody else. Economically, America is a powerhouse.
Most people don’t grade the US economy relative to far-off countries. But some do grade it compared with the past. Are we better off now than five or 10 years ago? Or worse off?
This way of thinking about the economy clearly bums some people out. Real incomes, adjusted for inflation, normally go up a little bit each year, which is how workers get ahead. But real incomes turned negative in 2022 as inflation heated up. The typical paycheck bought less, and that was a searing setback for millions of working families. The Federal Reserve began a series of interest rate hikes in 2022, which are working. As inflation came down, real incomes turned positive again in 2023, which means take-home pay is once again rising by more than inflation. But a lot of people still feel like they’re in a hole.
Yet even this doesn’t explain why half the country would think the economy is in poor shape. The stock market isn’t the real economy, but the two move in the same direction, and 61% of Americans say they have money invested in the stock market. Much of that is in retirement accounts, yet even so, those people are getting wealthier as stocks keep hitting new highs. How can half of the country rate the economy poor when nearly two-thirds of the same people are making money by doing nothing?
Homeowners are another prosperous group. The homeownership rate is 66%, equating to around 84 million homes. About 40% of those families own their homes outright, with no mortgage. They’ve benefited handsomely from the run-up in home values, boosting their wealth.
Of those with a mortgage, most should have been able to refinance when rates hit record lows below 3% in 2020 and 2021. That was free money, courtesy of the Fed’s super-easy monetary policy, and it lowered housing costs for millions of Americans, which is a rarity. For many people, the savings of a 3% mortgage far outstrip higher costs brought on by inflation. Again, there’s a large segment of the population that has been objectively better off during the last four years.
Vegetables are offered for sale at a grocery store on Feb. 13, 2024, in Chicago. (Scott Olson/Getty Images) ·Scott Olson via Getty Images
Then there’s a third way people think about the economy: How it seems compared with how they wish or believe it should be. This could be the main reason so many people think the economy is doing poorly. Sure, most of the numbers are pretty good, but there are a lot of people who want to buy a home and simply can’t afford it, and feel burned out. Jobs are plentiful but that doesn’t mean they’re rewarding or even tolerable. And some people are always falling behind, alas, given that they just don’t have the skills today’s economy rewards.
There are many other polls and surveys that suggest Americans are far more bummed out than a relatively solid economy should warrant. Economists have puzzled over the seeming breakdown between confidence and employment. Maybe inflation is a far more traumatic phenomenon than understood. Maybe people are worried about other things — crime, wars, cultural decay — that they express as concern about the economy. Maybe Americans just hate their leaders and want to punish them by telling pollsters everything sucks.
The real answer may be that a lot of people think they deserve more and they're frustrated they're not getting it. It doesn't really matter if our overall numbers are better than anybody else's or if this or that group is doing just fine. We're just not doing good enough.
If “poor” is the American public's baseline understanding of the economy when things are pretty good, we’re going to need some new terminology to describe what’s going to happen when another recession strikes, which is inevitable. Maybe pollsters should prepare to ask people whether the economy is “zombielike,” “apocalyptic,” or “the worst in human history.” The new American attitude seems to be: It can always get worse.
