How the economy is doing vs. how people think the economy is doing – economists write every day

Lately, many journalists and people on But Americans still seem dissatisfied with the economy. I wanted to summarize all the data supporting this disruption in one post.

Specifically, let's make a comparison between economic data from November 2019 and November 2023 (in some cases 2019q3 and 2023q3) to see how much things have changed. Or haven't changed. In many ways, it's remarkable how similar things probably were in the last month, before most normal people ever heard the word “coronavirus.”

First, let's start with “how people think the economy is doing.” Here are two surveys that go way back:

The University of Michigan Consumer Sentiment Survey is a very long-standing survey, dating back to the 1950s. In November 2019, it was about as high as ever, with the exception of the late 1990s. The value for 2023 is much, much lower. You almost never see a value close to 60 outside of recessions.

The Civiqs survey doesn't go back as far as the Michigan survey, but it provides very detailed, real-time assessments of what Americans think about the economy. And they think it's a lot worse than it was in November 2019. More Americans rate the economy as “very bad” (about 40%) than the sum of “fairly good” and “very good” (33%). The two surveys largely agree, but others show the same thing.

But what about the economic data?

First, let's look at the job market. Here are four general indicators.

The unemployment rate is the most widely used measure. It's almost exactly the same as 2019. But is that because people have dropped out of the workforce? No. The percentage of prime-age workers (ages 25-54) is slightly higher than 2019. But are wages so poor that people have to work multiple jobs? No. This is also the same as in 2019 (more on wages below). But don't many people have unemployment insurance? No. Like 2019!

What about broader indicators of economic performance? GDP is the widest. The growth rate (adjusted for inflation) last year is slightly better than the same period of 2019. Industrial production is slightly higher (although essentially the same) as in November 2019 (IP is a volume index, so it is not). must be adjusted for inflation). Our economy is growing healthily and we produce a lot of things.

This GDP number is adjusted for inflation, as is everything in this post, which needs to be. But inflation is of course a key sticking point for Americans when assessing economic performance. Another look at surveys shows that 96% of respondents who rate the economy as “poor” cite inflation as the reason for their rating (only 58% cite GDP). Cumulative inflation since November 2019 is nearly 20%, more than double what consumers are used to in a normal 4-year period. But looking at the latest data, it is clear that we are now back to more normal territory: 3.1% in November 2023 versus 2.1% in November 2019.

But although inflation is bad and entails many costs, when assessing economic performance and the situation of households, we must take into account another price that has also increased: the price of labor, that is, wages and household income. Here are several measures of wages and income as well as wealth, all adjusted for inflation using the CPI-U:

Some of these metrics are medians, others are averages, and one is a stock market index. But they all show the same thing: economic conditions are better now than in 2023. For some of them you could say: Well, not much better! And it's true, some Americans might consider the economy to be “bad” right now because things haven't improved much. But think again about recent growth indicators like GDP: the economy is growing back to normal, despite some very bad times over the last four years.

Finally, you may be wondering: Is the current growth all just an illusion? Is it based on households incurring debt? The comprehensive data suggests this is not the case. Here are two measures of debt (remember to always use a denominator: in nominal terms, of course, most measures of debt are at record highs!):

So what's going on? This discrepancy has also been noted several times recently, and people's looks have provided speculative answers. Higher nominal prices are clearly one reason Americans view the economy as poor, but of course that can't last forever! If prices never rise another penny but wages continue to rise, it will eventually be obvious to the average citizen that their real income has increased since 2019. Americans who have received raises since 2019 that are too small to keep up with inflation (Hello college professors!).

And when we look at trends in how consumers feel about the economy, many Americans seem to recognize that the economy is improving. While the University of Michigan indicator is still very low, it has increased significantly since June 2022, when it reached an all-time low (all-time meaning back to the 1950s!) of 50. The preliminary December reading is almost up to 70. And for the Civiqs survey, while the current “net good” rating is -29%, that's a big improvement from June 2022, when it was -57% (which is almost was as low as the lows of spring 2020, when it reached -61%).

You'll note that both surveys bottomed out in June 2022, which is also, unsurprisingly, the month that annual inflation peaked at 8.9%.

You might be tempted to think that this is primarily a partisan issue. And there is something there too. In the Civiqs survey, almost all Republicans rate the economy as bad. Democrats rate the economy as “net good” at 33%, which is better than November 2019! But if we look at the self-proclaimed independents, the shift in sentiment is clear: from +48% in November 2019 to -43% today. Partisanship fluctuates in the numbers against a Democratic president, but that's not all: Independents are very angry about the economy.

Perhaps there is no mystery here at all. Americans may be correctly assessing the economic situation, but with a considerable delay. They hit the right direction, just not the level. It will be very interesting to see how much the economy and economic sentiment will continue to improve by November 2024.

Here again all the data in a large table: