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The American economy is doing well in many ways. Unemployment is near record lows and employment near highs. Competition for labor has helped push up wages. Throw an American from 2009 or mid-2020 into the job market of 2022 and he’d probably be thrilled.
But those higher wages are less useful when gas prices are at record highs. Weekly extra earnings are dampened by paying more for groceries and other products, especially things downstream from fuel costs.
It’s no wonder, then, that a YouGov poll conducted for The Economist last month found that 58 percent of Americans think the economy is getting worse. This pessimism matches (and has surpassed in recent weeks) pessimism at the start of the coronavirus pandemic. Before that, the most measured pessimism reigned early in Barack Obama’s presidency as the country recovered from the Great Recession.
You can see the shift below. The impact of the pandemic about three quarters of Donald Trump’s tenure is evident; confidence in the economy collapsed. It recovered briefly before falling off again. Then, shortly after President Biden took office — and when the pandemic seemed to be finally receding — optimism returned. Until it didn’t happen.
An inseparable part of this is partisanship. If we separate the parties in the YouGov poll, you can see how much the views on the economy depend on the parties. During Obama’s presidency, Democrats were fairly optimistic about the economy, while Republicans were extremely pessimistic. Then Trump took office and positions quickly switched.
The pandemic caused everyone to be more pessimistic, but Republican confidence quickly recovered … until Trump lost re-election. Republican pessimism quickly returned.
Part of the challenge for Biden is that Republicans are less reluctant to assess that things are “about the same” — essentially a win for a Democratic president. But part of that is also that Democrats themselves are likely less positive about the way things are going. There hasn’t been a YouGov poll conducted during Obama’s second term in which Democrats were more pessimistic than optimistic about the economy. There have been 13 such polls for Biden this year.
Despite the media’s focus on various economic indicators, these partisan views are often detached from actual economic data. For example, there isn’t a strong correlation between how stock prices change in a month and the number of Americans who say they are positive about the direction of the economy. In the charts below, net views of the economy (those who think things are getting better minus those who think things are getting worse) fell along with stock prices at the start of the pandemic. Otherwise the movement is not uniquely linked (visually or mathematically).
A challenge here is that the pandemic has so rattled the system that it tends to blow the scale of things like job changes. However, note the subtle drop in jobs at the left end of the Employment Change chart below and how this relates to pessimism about the economy. Aside from the pandemic period, there is no other obvious connection.
If we just look at the time Biden was president, the correlation between stock prices and positive economic conditions is a bit stronger. The correlation between job growth and views on the economy ranges from non-existent to weak.
Then we come to inflation as measured by the consumer price index. CPI has risen every month since the pandemic began, with increases being much larger during Biden’s tenure. And CPI increases correlate more than any other factor with the overall view of the economy since early 2021, albeit inversely. (That is, inflation rises, optimism falls.)
Biden supporters are likely to point out that a focus on inflation is helping shift views south on the economy. It is difficult, for obvious reasons, to separate the actual increase in inflation from the reporting of inflation, making this theory both attractive and difficult to refute. I would note, however, that although Fox News has talked more about inflation than CNN or MSNBC, cable news mentions of monthly inflation are no more correlated with views on the economy than actual inflation figures. (For what it’s worth, which admittedly isn’t much.)
Unfortunately for the President, inflation has a tangibility that employment does not. If you have a job, you are probably less aware of the fluctuations in the job market. But almost everyone is noticing more expensive groceries and gas — even Democrats.
Partisanship is part of what drives pessimism. Of course, the prices are also included.
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