Nearly three-quarters of people feel at least okay with their personal economy, according to a poll released this week. However, other surveys suggest that people think differently about the broader economy.
David Becker/Getty Images
The labor market is still booming and unemployment has fallen to 3.4%. Incomes have increased for many of the low-wage workers.
And yes, there is inflation, but it looks like that is starting to come down too. That all sounds pretty good. When people are asked how they feel about their personal economy, they’re fairly optimistic: according to a survey released this week by the Federal Reserve, nearly three-quarters of people are at least happy with their personal economy.
But if you look at other consumer surveys — like the Conference Board’s Consumer Confidence Index or the University of Michigan’s Consumer Sentiment Survey — people seem to think the broader economy is battered.
So where’s the break?
Well, if people want to point out something in business that they need to be concerned about, they have a lot of options.
“Whether it’s inflation, recession, higher interest rates, or the newer debt ceiling,” said Shannon Seery, economist at Wells Fargo. She said people see and experience this stuff every day – including herself.
“I’m looking for a house so it’s a tough market right now with higher interest rates and still high prices,” she said.
And higher prices are quite triggering.
“We’re really, really sensitive to price increases,” said Eric Johnson, who studies how consumers think about finance at Columbia Business School. He said there’s a name for what’s going on here: loss aversion. That’s the idea that a loss feels twice as bad as an equal win.
In other words, “Losing $5 will worry me a lot more than winning $5 will make me happy,” Johnson explained. And he said the media would focus more on losses.
For example, the loss of purchasing power.
“Think of a gas price hike and how much gnashing of teeth and ads you hear and how much everyone is very upset,” Johnson said. “Well, gas prices are falling again, nobody’s dancing in the streets.”
Politics also plays a role in how people view the economy. Democrats thought it was worse during the Trump administration and Republicans think it’s worse now. But Claudia Sahm of Sahm Consulting and a former Federal Reserve economist said it’s not really changing the poll numbers.
“Because this pattern is so regular, they always kind of cancel each other out,” she said. Instead, Sahm said the discrepancy was due to the questions asked.
When asked about the overall economy, “people get very upset about inflation,” she said. “Makes perfect sense. But that’s different than asking her, “How are you?” Because you might find ways to deal with it.”
People still have jobs. Many still have savings to spend. So even if people are optimistic about the economy?
“Consumer spending continues. If you can keep spending, then you’re probably fine,” Sahm said. And if this continues, she said, regardless of how people feel about it, the economy will keep going.
Comments are closed.