The US economy has been a mystery in recent years. The job market is booming and consumers are still spending money, which is usually 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 the vibecession. Call it a secret. TikTok, media headlines or the long shadow of the pandemic are to blame. The darkness reigns. The University of Michigan Consumer Confidence Index, which looked a little sunnier this year after a significant slowdown in inflation in 2023, has fallen again. And while a sentiment indicator compiled by the Conference Board improved in May, the survey showed expectations remained shaky.
The negativity could be significant in the 2024 presidential election. More than half of registered voters in six battleground states rated the economy as “poor” in a recent poll by the New York Times, Philadelphia Inquirer and Siena College. And 14 percent said the political and economic system must be completely torn down.
What’s going on here? We asked government officials and prominent analysts from the Federal Reserve, the White House, academia and internet commentary what they think is happening. Here’s a summary of what they said.
Kyla Scanlon, founder of the term “Vibecession”
Price level is important, and people also misunderstand some facts.
The most common explanation for why people feel bad about the economy – one that every person interviewed for this article gave – is simple. When inflation was particularly rapid in 2021 and 2022, prices rose sharply. Now they’re not rising as quickly, but people are having to deal with the reality that rent, cheeseburgers, running shoes and daycare all cost more.
“Inflation is a pressure cooker,” said Kyla Scanlon, who is releasing a book this week called “In This Economy?” This explains common economic concepts. “It hurts over time. They had pretty high inflation for a couple of years and people are really having to deal with the consequences of that.”
But Ms. Scanlon also suggested that knowledge gaps could be part of the problem: A Harris poll for The Guardian this month found that a majority of Americans believed (incorrectly) that the United States was in a recession. About half said they thought the stock market was down compared to last year, even though it was up significantly.
“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 involves memory.
A big question is why – when the economy is growing, unemployment is at historic lows and stock prices are rising – things feel so bleak.
“When I talk to people, they all tell me that they want lower interest rates and they also tell me that the prices are too high,” Raphael Bostic told reporters last week. “People remember where prices used to be, and they remember not having to talk about inflation, and that was a very comfortable place to be.”
Mr. Bostic and his Fed colleagues have raised interest rates to their highest level in more than two decades to curb rapid price rises, and he said the key was to quickly bring inflation back to normal.
Jared Bernstein, CHAIR OF THE WHITE HOUSE COUNCIL OF ECONOMIC ADVISORS
It takes time to catch up with inflation.
As inflation cools, there is hope that the negativity could ease. Jared Bernstein noted that middle-class wage growth has outpaced inflation over the past 14 months and predicted that people would feel better if wages reached higher price levels.
“If that were wrong, everyone would be forever upset that gas wasn’t a dollar a gallon,” Bernstein said. “The two components of this adjustment are time and rising real wages.”
Loretta Mester, President of the Cleveland Fed
Wages have lagged.
But not everyone has broken even at this point, and that could explain the continued pessimism. On average, wage increases have not fully caught up with price increases since the start of the pandemic, when comparing increases in the consumer price index to a wage and salary measure that Fed officials are closely watching.
“They still haven’t caught up with all the backlog,” Loretta Mester said. “You’re still in a bit of a bind.”
Ms. Mester pointed out that people were also having a hard time affording a home as prices skyrocketed in many places and high interest rates made purchasing a first home difficult, putting this part of the American dream out of reach for many.
Lawrence H. Summers, Harvard economist and commentator
Interest rates are part of the problem.
That touches on a theme Lawrence H. Summers raised in a recent economics paper: For most people, the Fed’s higher interest rates in an attempt to curb demand and curb price increases feel like another form of inflation. In fact, when you add high interest rates to inflation, it explains most of the gap between consumer confidence and what one might expect.
“The real cost of living is much higher than the inflation reflected in the consumer price index,” Mr. Summers said in an interview. He noted that consumer confidence improved as market-based interest rates, which are factored into mortgage and leasing costs, eased earlier this year and then fell again as they rose.
Charlamagne Tha God, radio host
People remember more pleasant times.
Whatever is causing the discontent, it appears to be translating into negativity toward Mr. Biden. In the latest Times poll, many said they believed the economic and political system needed to be changed, and fewer said they believed Mr. Biden would bring about major change, unlike former President Donald J. Trump.
Charlamagne Tha God recently suggested on “The Interview,” a Times podcast, that black voters in particular may be turning away from Mr. Biden and toward Mr. Trump because they associated the former president with the last time they met felt financially secure. Mr. Trump’s administration sent out two rounds of stimulus checks, which Mr. Trump signed. Mr. Biden sent one out, but he failed to do so. And inflation began rising in 2021 after Mr. Trump left office.
“People live paycheck to paycheck,” Charlamagne said in a follow-up interview specifically about the economy. “You don’t know the struggle until you have to choose between paying for your car or paying your rent.”
He says rents have risen dramatically since before the pandemic and car loan defaults are surging. While inflation and higher interest rates are a global phenomenon, people tend to place the blame for current economic challenges on the incumbent.
“People can’t look past their bills,” Charlamagne said. “All we want is upward mobility and security, and anyone who can provide that, even for a fleeting moment, will never be forgotten.”
Susan Collins, President of the Boston Fed
People are worried after the pandemic.
In fact, the recent economy has offered something of a split screen: some people are doing really well, watching their retirement portfolios improve and their real estate prices rise. But these people were often already doing well. Meanwhile, people with credit card balances face much higher interest rates, and many Americans have exhausted any savings they had accumulated during the pandemic.
“There are groups that are doing really, really well and there are also groups that are struggling,” Susan Collins said. “We talk to people who have great difficulty making ends meet.”
However, she also pointed out that the period since the pandemic has been marked by uncertainty. Changes in interest rate policy, years of inflation and headlines about war and geopolitical unrest may have shaken people’s view of 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
Some of this may have to do with media negativity.
However, there is an enduring mystery surrounding 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 to understand the national economic situation, and news sentiment has gotten worse in recent years, said Aaron Sojourner, who recently authored a study suggesting that coverage of economic news has become more negative since 2018 and has become significantly more negative since 2021.
“Over the past six years, the tone of economic news has been significantly darker and more negative than one would expect based on macroeconomic variables,” he said.
However, he acknowledged that journalists incorporate real experiences and data on consumer sentiment into their reporting. Therefore, it is difficult to say to what extent bad mood causes negative news and how much negative news causes bad mood.
“Does the mood cause the news, or does the tone of the news cause the mood? I don’t know,” Mr. Sojourner said.
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2024-05-30 15:38:34
www.nytimes.com
