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CNN
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Nathan Frederiksen is doing pretty well.
He turns 40 this year and is on track to retire at 60. It requires some sacrifices—he drives the “unsexiest car ever,” handles home repairs himself, and doesn't eat out much—but he's able to save 10% of his income for retirement and maintain an emergency savings fund, all while maintaining his wife and his four children in a suburb of Boise, Idaho.
“I understand that I've been lucky with some of my job prospects, but I don't make an exorbitant amount of money,” he told CNN. “I have a solid middle-class income.”
Frederiksen, who leads a small team of financial analysts, believes his bank account is in good shape. But he doesn't think that way about the overall economy.
“It’s definitely gotten difficult in the last few years,” he said. “We have felt inflation in our budget and spending, but I have peace of mind knowing that we will be in a pretty good financial position if something comes along.”
He is not alone. A recent Wall Street Journal poll of American voters in swing states found that while people think the national economy is in bad shape, they feel good about their personal finances.
The vast majority of respondents – 68% – said it was becoming increasingly difficult for the average person to get ahead, while almost half of respondents said their own finances were moving in the right direction.
Only a quarter of registered voters in seven key states — Arizona, Georgia, Michigan, North Carolina, Nevada, Pennsylvania and Wisconsin — said the economy had improved over the past two years, the Journal's poll found.
This is not a new dynamic. In a Gallup poll last April, only 16% rated the economy as “good” or “excellent,” but 45% said their personal finances were “good” or “excellent.”
But according to available data, the economy has improved.
When President Joe Biden took office in 2021, the unemployment rate was 6.3%. Today it is 3.8%.
In 2022, US inflation (as measured by the consumer price index) rose to 9.1%, a level not seen in four decades. Today it is a much cheaper 3.2%.
U.S. gross domestic product – a broad measure of the economy – grew 2.5% in 2023, outperforming other developed economies. Financial markets ended the first three months of the year excellently, with the S&P 500 alone reaching 22 record highs.
In the United States, there is a growing disconnect between economic sentiment and economic data that is well documented.
But the dichotomy between how people feel about their own finances and the economy as a whole presents a different problem.
“It depends on where people get their information,” said Ben Harris, director of the Economic Studies program at Brookings. “I can assess how I am doing financially without the help of others. But I need the help of others if I want to assess a $20 trillion economy. And I have a PhD in economics.”
Harris looks to official data sources, “but I don't think the average American goes to the Bureau of Labor Statistics,” he said.
Where do they get their information from?
“I think the answer unfortunately increasingly lies with social media and biased cable news sources,” Harris said. “So if you go to TikTok or Facebook to learn about macroeconomics, there’s a very high chance it’s wrong.”
Jonathon Barricklow and his family are doing well financially.
Barricklow, a director of an automobile company in Bowling Green, Ohio, even made a nice chunk of money investing in the stock market during the pandemic. But he was keenly aware that increased inflation was still taking a big bite out of other people's paychecks.
At least that's what he thought.
Barricklow recently volunteered to operate a concession stand during a gymnastics meet. This was his second year doing this and he anticipated that he would have to raise prices due to sky-high inflation rates. But only two items had increased in price since last year.
“It was a shocking realization for us,” he said. “That the rate is actually only 3.5%, which is not astronomical.”
That inspired Barricklow to take a closer look at his own grocery bills.
“It's difficult to keep track of the grocery bill when you have children growing up because the cost of everything keeps rising. So we watched our grocery bill get higher and higher,” he said. But when he did a year-over-year comparison, he found that his costs had remained almost the same between 2022 and 2023.
“It was an eye opener. It's not that bad. But it’s only the extreme stories that get out to the public,” he said.
It's important to look at consumer behavior, not just sentiment, to determine how Americans feel about the economy, Harris said.
This is actually how consumers behave: they continue to spend a lot of money, quit jobs because they think they'll find something better, and invest in the stock market. These behaviors signal that, on the whole, Americans are actually doing quite well when it comes to their economy.
Americans are still reeling from the effects of a pandemic that brought much of the U.S. economy to a sudden halt. Many people nearing retirement told CNN that the shadow of the 2008 financial crisis – and its impact on their savings – still clouds their perception of the economy.
In addition, the geopolitical conflict in the Middle East and Europe, confusion over the real estate market and election year unrest are unsettling even the best-prepared savers and creating an unsettling sense of uncertainty.
The potential for a stock market crash keeps Dave Koloskee, a 60-year-old construction and home inspector in Erie, Pennsylvania, awake at night.
“If half of our retirement savings were gone overnight for a year or two, that would really hurt,” he said. He believes he will be able to retire at 65, but still has financial concerns. He worries about stagnant incomes and inflation.
Why do these worries about the future feel so real in the present?
When people live with chronic pain, their pain tolerance actually decreases, said Megan McCoy, a professor of financial therapy at Kansas State University. “All your nerves are highly excited and ready to react. This actually makes it worse to deal with pain,” she said.
The same goes for financial pain.
“We have been living in uncertainty for four or five years,” she said. “We've been waiting for the other shoe to drop, and that kind of anticipation makes us less able to deal with everyday stressors or small fears. We may react strongly to economic news because we are already prepared for it.”
McCoy recently conducted a survey of financial planning clients who tend to prefer older people with higher net worth. Despite being served by a financial manager, 72% of these clients reported experiencing financial anxiety.
Julie Levitch, a single mother who turns 55 this week, works at a technology company in Scottsdale, Arizona.
The 2008 recession and subsequent medical bills “destroyed” her finances, and for a time she struggled to stay afloat. “I used to have disturbing dreams that I was retired and living in a box on the street,” she said.
But about a decade ago, she started taking her finances seriously. She looked into Suze Orman, subscribed to Kiplinger's Personal Finance, and made big concessions so she could put 20% of her salary into her 401(k).
She managed to buy a house with an interest rate of 2.5%. It has increased significantly in value. “Now my mortgage is less than the rent for a one-bedroom apartment in the same area,” she said.
But she's still worried. She sees friends in her industry discussing their layoffs and looking for work on LinkedIn and isn't sure what the artificial intelligence boom will mean for her industry.
She sees people around her who have problems.
Levitch is part of a local bowling league in Arizona. Every Tuesday evening she meets with about 100 other people in her alley. “Many of these people live on the edge financially. And I think they have problems,” she said.
“I don't even talk about my personal finances because I think they would be uncomfortable if I told them, 'Hey, I'm fine,'” Levitch said.
“I think a lot of people I know and are friends with are really struggling,” she said. “I understand that there is this discussion about 'everything is great,' this elitist discussion about finances. It makes people angry when they hear that and they don’t feel well.”
But some Americans find themselves in the same position as Levitch – with a sudden windfall due to a boom in real estate and stock prices, Harris said.
“This is not like previous wealth booms, which occurred primarily among the top 20% of households,” he said. “You see real inflation-adjusted wealth gains across the entire income distribution, including those at the bottom. You see that the wage increase is greatest for those at the bottom.”
Middle-class or wealthier people might feel guilty, Harris said, “but I can say that inequality has gone down.”
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