The American economy has remained an enigma in recent years. The job market is booming and consumers continue to spend, which is generally a sign of optimism. But if you ask Americans, many will tell you they feel bad about the economy and are unhappy with President Biden’s economic record.
Call it vibecession. Call it a mystery. Blame it on TikTok, the media headlines or the long shadow of the pandemic. Gloom reigns. The University of Michigan’s consumer confidence index, which looked a little sunnier this year after a substantial slowdown in inflation over the course of 2023, deteriorated again. And even though the Conference Board’s confidence index improved in May, the survey showed that expectations remained fragile.
That negativity could end up mattering in the 2024 presidential election. More than half of registered voters in six battleground states called the economy “bad” in a recent poll by the New York Times, the Philadelphia Inquirer and Siena College. And 14 percent said the political and economic system should be completely demolished.
What is happening here? We asked government officials and leading analysts from the Federal Reserve, the White House, academia and Internet commentators what they thought about what was happening. Here’s a summary of what they said.
Kyla Scanlon, creator of the term “Vibecession”
Price levels matter, and people get some facts wrong, too.
The most common explanation for why people feel bad about the economy – given by everyone interviewed for this article – is simple. Prices rose a lot when inflation was very rapid in 2021 and 2022. Now they are not increasing as quickly, but people have to deal with the reality: rent, cheeseburgers, running shoes and daycares all cost more.
“Inflation is a pressure cooker,” said Kyla Scanlon, who is publishing a book this week called “In This Economy?” this explains common economic concepts. “It hurts over time. You’ve had a few years of pretty high inflation, and people are really struggling with the consequences of that.
But Ms Scanlon also pointed out that lack of knowledge could be part of the problem: a Harris poll for The Guardian this month found that a majority of Americans (wrongly) thought the US was in recession . About half said they think the stock market is down compared to last year, even though it is up considerably.
“Yes, there is economic frustration, but these are objectively verifiable facts,” she said.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta
Part of this is about memory.
The big question is why — when the economy is growing, unemployment is historically low and stock prices are climbing — things look so bleak.
“When I talk to people, they all tell me they want interest rates to be lower, and they also tell me prices are too high,” Raphaël Bostic told reporters last week. “People remember where prices were, and they remember that they didn’t need to talk about inflation, and it was a very comfortable place to be.”
Mr. Bostic and his Fed colleagues raised interest rates to their highest level in more than two decades in an effort to curb rapidly rising prices, and he said the key was to quickly fight for inflation returns to normal.
Jared Bernstein, CHAIRMAN OF THE White House Council of Economic Advisers
Catching up with inflation takes time.
As inflation slows, there is hope that the negative effects will lessen. Jared Bernstein noted that over the past 14 months, middle-class wage growth has outpaced inflation and predicted that people would feel better as wages caught up to higher price levels.
“If this were false, everyone would be walking around forever upset that gasoline doesn’t cost $1 a gallon,” Mr. Bernstein said. “The two components of this adjustment are time spent and the increase in real wages.”
Loretta Mester, President of the Cleveland Fed
Wages are lagging behind.
But not everyone has broken even at this point, and that could partly explain the lingering pessimism. On average, wage gains have not fully caught up with the rise in prices since the start of the pandemic, comparing the increase in the consumer price index with a measure of wages and salaries that officials of the Fed are watching closely.
“They haven’t made up all the lost ground yet,” Loretta Mester said. “They’re still in a bit of a hole.”
Ms. Mester noted that people are also struggling to afford housing because prices have soared in many places and high interest rates make it difficult to own a home, putting that part of the American dream out of reach for many.
Lawrence H. Summers, Harvard economist and commentator
Interest rates are part of the problem.
This touches on an issue that Lawrence H. Summers recently raised in an economics article: To most people, the higher interest rates that the Fed is using to try to slow demand and crush rising prices look like to another form of inflation. In fact, adding high interest rates to inflation explains most of the gap between consumer confidence and what one might expect.
“The cost of living is well above inflation, as reflected in the consumer price index,” Mr. Summers said in an interview. He noted that consumer confidence improved when market rates, which drive mortgage and rental costs, eased early this year, then fell again as they rose.
Charlamagne Tha God, radio host
People remember more comfortable times.
Whatever the cause of the discontent, it appears to be translating into negativity toward Mr. Biden. In the recent Times poll, many said they thought the economic and political system needed to be changed, and fewer said they thought Mr. Biden, unlike former President Donald J. Trump, would inaugurate big changes.
Charlamagne Tha God recently suggested on “The Interview,” a Times podcast, that black voters in particular might turn from Mr. Biden to Mr. Trump because they associated the former president with the last time they feel financially secure. Mr. Trump’s administration sent two rounds of stimulus checks, which Mr. Trump signed. Mr. Biden sent one, which he did not do. And inflation began to rise in 2021, after Mr. Trump left office.
“People are living paycheck to paycheck,” Charlamagne said in a follow-up interview focusing specifically on the economy. “You don’t know how difficult it is until you have to decide whether you’re going to pay your car or your rent.”
According to him, rents have increased significantly since before the pandemic, and delinquencies on auto loans are increasing sharply. Although inflation and rising interest rates are a global phenomenon, people tend to blame current economic woes on those in power.
“People can’t see beyond their bills,” Charlamagne said. “All we want is upward mobility and security, and anyone who can provide us with that, even for a fleeting moment, will never forget that. »
Susan Collins, President of the Boston Fed
People are anxious after the pandemic.
In fact, the recent economy has provided a sort of split screen: Some people are doing just fine, seeing their retirement portfolios improve and their home prices appreciate. But these people were often already well-off. Meanwhile, people with credit card balances are facing much higher rates, and many Americans have exhausted whatever savings they managed to accumulate during the pandemic.
“There are groups that are doing really, really well, and there are also groups that are struggling,” Susan Collins said. “We are talking to people who are having a lot of trouble making ends meet. »
But she also noted that the period following the pandemic has been marked by uncertainty. Changes in interest rate policies, years of inflation, and headlines about war and geopolitical upheaval may have shaken how people view their economic situation.
“I think there is a different level of anxiety post-pandemic that is hard to rule out,” Ms. Collins said.
Aaron SOJOURNER, the WE Upjohn Institute
Part of this could be due to media negativity.
Yet there remains a lingering mystery about the vibecession. People tend to be more optimistic about their personal economic situation than about the economy as a whole.
That could be because Americans rely on the media for their perception of the national economic situation and news sentiment has become more pessimistic in recent years, said Aaron Sojourner, who recently wrote a study suggesting that economic media coverage has become more negative since 2018, and much more negative since 2021.
“Over the past six years, the tone of economic news has been considerably more bitter and negative than one would predict based on macroeconomic variables,” he said.
But he acknowledged that journalists take real experiences and consumer opinion data into account in their reporting. It is therefore difficult to know to what extent bad vibes generate negative news and to what extent negative news generates bad vibes.
“Is it sentiment that drives the news, or is it the tone of the news that drives the sentiment? I don’t know,” Mr. Sojourner said.
News Source : www.nytimes.com
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