What should be good news for people seems to be falling flat even relative to prior times with high inflation.
A combination of all these things. Covid came after a decade of low interest rates, relatively easy credit and low prices, steady stock market increases (the halo effect of which probably reached non-investors) and ample supply of everything. And then suddenly with Covid that changed -- not only lingering effect of that shock, but an idealization of the "before-times," plus everyone had extra cash. Expectations that everything would be great once Covid ended were not only not realized but all these new complicated problems emerged. The sudden severe interest rate increases were a shock -- a sense that the "good times are over." Prices, especially food prices, starting rising during Covid. May have been blamed on supply chain but in many cases Covid gave companies that had not had pricing power for years an opportunity to take price -- major price increases that just continued. Add in the end of student debt relief, medicaid expansion, etc etc. Just feels to many that the good times, the easy times, are over. Tend to think the strikes are a symptom, not a cause, from the folks who didn't really benefit from the "good times." Were the "good times" really any more than a big asset bubble driven by easy money for too long?
Great post. My take is that people anchor what a price was and even if it hasn’t changed in past 9 months they are still thinking what is was 2 - 3 years ago. Also with rates up if you borrow you are paying more even if the price is the same.
The employer/employee relationship is being reset culturally, employers after the great recession were used to being able to do almost whatever they want, now that is changing and I think both sides feel it and that creates this economic tension that is hard to measure, because people aren't asking the right questions
Great article. The disconnect between the macro data and the consumer sentiment seems to be widening. Economists sound out of touch when we say that the economy is doing well.
Thanks for the very useful analysis Claudia. We tend to want instant gratification so waiting for all the amazing legislation to show benefits leaves Americans wanting. Additionally all the political dysfunction on the right doesn’t present much optimism for much of anything to include the economy. I subscribe to your conclusions as we cannot minimize the horrifying impacts of a once in a lifetime pandemic. I remain optimistic as the US economy should post a 5% growth and our fiat currency maintains global stability. Patience...
Mismatch! Now that's an illustrative line graph.
Thank you so much Claudia for such a great posting that opened 💡.
it’s simply a situation of buyers remorse .. this buyers remorse is specifically regarding Covid 19 and all the iterations that this overlaid on our lives..
I am thinking that You won’t be able to see it in a bureau of labor statistics chart or any of the 6 other government entities that try to discern human behavior, or the human condition ..
thank You Claudia for sharing Your insight ..
Glenn A. Melcher
People generally have been more depressed and anxious since COVID
The working class has suffered under neo-liberal economic policies for 40 years. They carried the largest burden during COVID. The fed has opted for monetary policy that scape goats them. The role of union representation is at an all time low. And right leaning, or self serving politicians consistently diminish their value in our society/economy. As always, I appreciate your analysis, but I’m sorry to say.....I’m not surprised the level of expectation is in the cellar.
I think, respectfully, blaming COVID is missing the forest for the trees. I think the data economist are relying on is either collected inaccurately or these measures simply do not reflect the modern economy in 2023. It’s is very clear from the numerous strikes that many workers--and not just low income workers--feel and perhaps rightly so that they can no longer obtain a comfortable standard of living at their current wages. We see report after report of people unable to scrounge even $500 for a unexpected event, or millions who feel they will not be able to restart student loan payments. Americans are having less children, even less children then they want to have, why? Time and money. Furthermore, clearly the sentiment when I talk to many people and it seems from reports too, that people believe we are in a recession even though the economy is doing (perhaps exceptionally) well compared to recent history when looking at GDP and jobless claims. So why do many people feel economically insecure despite strong data? And why has no one been able to mathematically prove why sentiment is so negative? Seems like we need to go back and evaluate the methods.
Possible gov shutdown due to foolishness on the far right
Higher oil prices
Student loan repayments starting in October
Slowdown in China economy
At least one more fed rate hike
Unfortunately, the potential for the uneasy feeling in the economy could continue despite the fact the numbers in the economy regarding the labor market, real wages positive, inflation well off its peak and unemployment near record lows. Bottom line, I think the disconnect to me comes from the media who isn't helping matters constantly mentioning inflation despite it being well off its peak as I've said.
Matt Stoller argued yesterday (https://www.thebignewsletter.com/p/strikes-and-bidenomics) that a possible source of gloom is sharply rising monthly payments for auto loans and mortgages. Those payments reflect the higher interest rates imposed by the Fed, but the CPI focuses more on auto and home prices. That deflects attention from the pessimistic impact of monthly payments on average people.
Covid was a slap in the face to the whole planet. Like an earth destroying atomic bomb went off, but after the initial impact we looked around and most of us were still alive. We all realized who the "essential workers" really were, and it wasn't the CEO's.
There's a global movement that has been pushing harder and harder toward authoritarianism, and they have a billion dollar disinformation ecosystem behind them.
Some of the gloom is from people who wonder what we can do to protect democracy and why the mainstream media are mostly looking the other way.
Others feel gloom because they think their strongman should be in power to force others to believe what they believe.
OK, there is a bigger picture here. Over the last four decades, people in the U.S. have felt that they have less and less control of their lives. I wrote about this in my piece, "I Want To Talk to a Person." We feel nickeled and dimed, and we can't get easy redress for our complaints. We can't even get the thing we think we're ordering online, or book hotel rooms in a straightforward way. Add on to that longterm simmering (that I argue had a lot to do with the rise of Tea Party/MAGA) that after the recession - which was about housing - the rate of corporate or trust ownership of rental properties tripled. And even individual landlords don't manage their properties, but hire out property managers. Rents have risen way more than incomes, and renters often feel the property company is not responsive - especially as time goes on and the landlord wants to turn over the unit to charge more money.
During the pandemic, we felt a reprieve from all of this when we started getting checks from the government. It became crystal clear how little we were making even pre-pandemic vis a vis the cost of living, and the extra money helped. Increasing the child tax credit - and making it a monthly payment - also helped families feel more secure. That was taken away, as Joe Manchin and Larry Summers told the people getting the tax credit that they were users who would just spend it on drugs. It's like being in an abusive family. It may take a while to realize you're being abused, but once you do, and you've begun to see other families who aren't like yours, then you end up going back to your abusive parents, then you are even more acutely aware of what you had briefly, and what you are being forced to live with now. It's why all of the "Biden got through these watershed laws" doesn't get through to people. Biden didn't get the main thing that would help people in the moment - money coming in, or forgiveness of their loans going out. So when we ask if people feel better economically than they did a year ago, of course the answer is no. Because a year ago, we were excited about student loan forgiveness, and the tax credit only ended in December.
There is a strong divergence in reported sentiment by political affiliation. See 5b:
That fits very well with the notion that there is a social element to the oddly low average level of reported sentiment. Culture wars are poisoning consumer sentiment during Democratic presidencies, but less so during Republican presidencies. We have too many sociopathic opinion leaders on the right.
Note also that there is a sizable divergence between reported personal economic circumstances and consumer moods, especially among Republicans.