Unemployment is low, the stock market booming, GDP growth surging, and inflation reasonably well-behaved. It seems like a recipe for a morning-in-America surge of economic optimism.
The big picture: Nope.
- A range of measures show Americans to be exceptionally gloomy about the economic picture.
- By some surveys, public opinion on the economy is roughly as negative as at the height of Biden-era inflation or even the 2008 global financial crisis.
- It appears to reflect some underlying weakness in the economic forces that most directly affect Americans' well-being, which are not evident in big-picture economic data.
Driving the news: The new Axios Vibes survey by the Harris Poll shows 65% of Americans see themselves as either sometimes or regularly financially squeezed each month, up from 58% in June 2024.
- Surveys with longer track records tell a similar story. The University of Michigan Consumer Sentiment Index was 21.4% lower in September than a year earlier. It is now lower than at any point during the 2008-2009 recession.
- The Conference Board's Consumer Confidence Index fell in September to 94.2, below the 98.7 recorded in June 2022 when inflation peaked.
The intrigue: One potential explanation is politics — that Democrats are giving pessimistic answers in their survey responses out of unhappiness with the broader Trump agenda, rather than describing economic reality.
- It's true that sentiment, as measured by the Michigan survey, has proven more resilient among Republicans than among Democrats.
Yes, but: Compared to February 2020, during Trump 1.0, both Republicans and Democrats are sharply more negative about the economy now.
- The Consumer Sentiment Index for Republicans in September was 33.5 points below February 2020, while for Democrats it was 39.1 points below.
Between the lines: A more compelling set of explanations rests on the unusual constellation of forces shaping job opportunities, growth, and prices right now.
- Yes, the headline Consumer Price Index is up only 2.9% over the last year. But that rise in prices comes on top of the earlier Biden-era surge in prices — and at a time when paychecks aren't rising as rapidly as they were a couple of years ago.
- Moreover, some staple goods that people buy frequently have experienced particularly steep price increases, including ground beef (up 12.8% over the last 12 months), eggs (up 10.9%) and coffee (up 20.9%).
- In the Axios Vibes poll, 47% of survey respondents said it has gotten harder to afford groceries since this time last year, compared to 19% who said it has gotten easier.
What they're saying: "Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances" — the highest in a year, noted Joanne Hsu, director of the Michigan survey.
Zoom out: There are similar asterisks on other seemingly buoyant data points.
- GDP rose at a robust 3.8% rate in Q2, and it looks like a similar reading is on the way for the quarter that ended Tuesday. But much of that is driven by data center and AI investment that doesn't create many jobs, and may actually depress sentiment by pushing up household electricity prices.
- The unemployment rate is a low 4.3%, but the rate at which employers hired new workers fell to match its lowest level in five years in August. Workers seem to detect harder times ahead, especially among young adults.
- Not everybody has meaningful exposure to the stock market's gains. The Michigan survey, for example, found that sentiment held steady among those with larger stock holdings and fell among those with little or no stock market exposure.
The bottom line: The relationship between public opinion on the economy and actual consumer behavior has been extremely weak over the last few years, so this survey data doesn't necessarily presage a slump.
- But it does suggest Americans perceive more economic distress than the economic headlines would imply.
