Why are Americans so negative about the economy? It’s a big problem for Biden.

Americans are not happy with the state of the economy, and that’s a big problem for President Biden.

Even though many indicators suggest the U.S. economy is doing surprisingly well in the post-pandemic era, poll after poll shows that consumers don’t view the economy in the same way.

A recent Harris Poll found that despite record numbers of new jobs being created under Biden’s administration and the unemployment rate remaining below 4% for the longest time since the 1960s, nearly three in five Americans say the U.S. is in a recession.

Two common measures of consumer opinion, the University of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index, have been trending upward since mid-2022 but are still well below levels expected based on recent economic data.

The gloomy economic mood could pose a problem for Biden, who faces former President Trump in his reelection bid in November. Inflation and the economy remain top concerns for voters, and a recent ABC News/Ipsos poll found that more Americans trust Trump more than Biden on both issues.

Experts say everything from the lingering effects of four decades of high inflation to a changing media environment are to blame for the persistent disconnect between how Americans feel about the economy and what the data shows.

“Prices are something people feel every day,” said Sharnette McLeod, an economist at TD Economics. “People go to the grocery store, they go to the gas station, and they’re seeing rising prices.”

Inflation has eased significantly since hitting a 40-year high of 9.1% in June 2022, falling to 3.4% as of April. But even with the improvement in inflation, Americans are still struggling with steep price increases.

“Even though they say inflation is coming down, they’re still seeing price levels go up,” McLeod told The Hill. “They remember prices being this high in 2019, and now they’re 20 percent, maybe 30 percent or 40 percent higher in some cases.”

Consumer prices have risen just 3.4% since April of last year, but they are up about 24% since January 2019 and 19% since President Biden took office in January 2021.

McCloud noted that many Americans have never experienced inflation on this scale in their lifetimes.

“We haven’t seen inflation like this in over 40 years,” she said. “For a lot of people under 40, they’ve never seen very high inflation in a short period of time, so this is a shock to a lot of them.”

Biden and his economic team have sought to strike a balance between touting the inflationary progress while also being mindful of its impact on Americans.

“The cost of living remains too high for many working families,” National Economic Council Director Lael Brainard acknowledged Friday following the release of new inflation data.

According to the personal consumption expenditures (PCE) index, an inflation measure closely watched by the Federal Reserve, prices rose 0.3% in April and 2.7% over the past 12 months.

However, Brainard also noted that “today’s PCE report indicates continuing progress toward lowering inflation.”

“Annual core inflation is at its lowest level since March 2021, and overall inflation is down 60% from its peak,” she said. “President Biden will continue to fight to reduce costs, while Republicans in Congress are committed to cutting taxes for the super-rich and big corporations.”

The Fed began raising interest rates to cool the economy as inflation spiked in early 2022. With inflation still above its target, the Fed has been keeping interest rates in the 5.25% to 5.5% range, a 20-year high, since July 2023.

Those interest rate hikes are weighing heavily on consumers, but some experts say they may not be fully accounted for in current inflation measures.

Recent Working Paper Former Treasury Secretary Larry Summers argues that the Consumer Price Index (CPI), a commonly used inflation measure, underestimates the impact of borrowing costs on home and car ownership.

“[What] “People on the ground are feeling it in the form of rising house prices and interest rates, but the official data doesn’t capture that,” MacLeod added. “The official data may be telling one thing, but what people are experiencing in their daily lives is a different reality for them.”

Brett House, a professor of professional practice at Columbia Business School’s economics department, said rising mortgage rates coupled with rising interest rates have created a “gutter” in the housing market that could be contributing to Americans’ gloomy mood.

The average interest rate on a 30-year fixed-rate mortgage is currently about 7%, up from record lows during the pandemic, according to Freddie Mac.

For people who bought homes during the pandemic, it made sense to lock in their mortgages at those ultra-low rates, but the result is less inventory in the housing market, making it more difficult for would-be buyers, House told The Hill.

House added that while the job market has remained surprisingly strong despite the Fed’s interest rate hikes, labor turnover could also be creating uncertainty for U.S. workers.

“The labor market has been very strong for employers over the past few years, with hiring and wage growth continuing to outpace inflation,” he said.

“But some of the larger sectors, like finance and technology, are in the midst of cutting jobs even as they add jobs as they pivot to AI-related investments,” he added.

Tech companies are set to lay off more than 165,000 employees in 2022 and more than 263,000 employees in 2023. Layoff.fyiCuts in tech jobs have continued this year, with around 90,000 people laid off so far.

Other experts point to changes in the media environment and how Americans get their news.

Beth Akers, a senior fellow at the American Enterprise Institute, said Americans now increasingly get their news from social media platforms, which tend to highlight the negative.

More than half of U.S. adults say they sometimes or often get news from social media in the last year. investigation According to the Pew Research Center.

Three in 10 Americans said they regularly use Facebook to watch news, followed closely by YouTube at 26%. Other social media sites frequently used to watch news include Instagram, TikTok, and X (formerly Twitter).

Akers told The Hill that potential misconceptions people have about inflation may become even more important in this context.

“As people start to receive information about inflation, negative information about the economy, in new and perhaps more salient ways, it may become more important than ever that people really have an accurate understanding of how inflation works,” she said.

Akers pointed out the common misconception that a decline in inflation translates to lower prices. Instead, inflation rates change over time, so a decline in prices simply reflects slower price increases.

“Maybe before, people didn’t fully understand inflation, but they didn’t really need to understand it as much because they weren’t overwhelmed with negative thoughts about how inflation was affecting their daily lives,” Akers said.

“The way people are currently learning about what inflation means for their lives may exacerbate these misconceptions and exacerbate the emotional response,” she added.