Why are Americans so gloomy about their great economy? [View all]

[qwlauren35]

https://www.economist.com/united-states/2024/01/14/why-are-americans-so-gloomy-about-their-great-economy

I think there is a firewall. I clipped 4 paragraphs - I think this is a good summation for those who can't see the article.

More recent baselines are even less flattering. Although few Americans would want to go back to a world of covid shutdowns, many did receive big benefits from the government’s spending spree at the time. After-tax personal income is about 15% lower now than in March 2021, when it was propped up by the massive stimulus package passed by Democrats soon after Mr Biden took office. Another unflattering comparison with the recent past: the aggressive interest-rate rises needed to tame inflation have made loans for houses and cars much more expensive. Housing affordability hit its lowest in decades last year, serving as an easy target for critics of Mr Biden. The Republican National Committee says Bidenomics is “pricing out millions of people from the American Dream”.

This suggests a second category of explanation: that opinion polling and sentiment surveys may have a negative bias. Profound partisan hostility is undoubtedly one factor. In their study Messrs Cummings and Mahoney calculated that Republican antipathy towards a Democrat-controlled White House may account for about 30% of the sentiment gap today.

Another element may be the tone of news coverage. Ben Harris and Aaron Sojourner of the Brookings Institution, a think-tank, studied the relationship between economic data and an index of economic news sentiment. Since 2021 the news-sentiment index has, like the consumer-sentiment index, been notably worse than what would be expected from the data. And that may be only scratching the surface. The news-sentiment index, created by the Federal Reserve’s branch in San Francisco, is based on economic articles in major American newspapers. Throw in the vitriol that tends to go viral on social-media platforms, and the negative bias might be even more pronounced.

A final explanation is that there may simply be a long lag between the post-pandemic recovery and feelings about the economy. It has been a topsy-turvy period. The extreme uncertainty of the covid years—job losses, school closures, bankruptcies and illness—took a toll on people. Many are still upset by the bruising battle with inflation. Although inflation has moderated, prices are nearly 20% higher than when Mr Biden took office. The sticker-shock takes some getting used to. Messrs Cummings and Mahoney estimate that a 10% inflation surge reduces consumer sentiment by 35 index points in the year it occurs, 16 points in the next year and eight points the year after that.