What Americans get wrong about Biden’s economy

What Americans get wrong about Biden’s economy

President Biden faces two economic challenges as he campaigns for re-election next year. The first is to lower inflation and help Americans regain some of the purchasing power they have lost since prices started rising in 2021. This will likely happen slowly as inflation continues the downward trend that has been in place since last year, assuming wages hold up. .

The second problem may be more confusing: getting Americans to appreciate what is going right in the economy. Biden constantly talks about the booming job market and all the public investments the government is making under his watch, and voters still show no enthusiasm at all. Biden’s popularity declined as inflation rose in 2022, and has not improved at all since then, despite inflation falling by more than 5 percentage points.

A new Yahoo Finance-Ipsos poll reveals some of the misconceptions people have about the economy. Americans are well aware of inflation, which reached a 40-year high in 2022. When we asked people what they thought of inflation, 88% said it was unusually high. The Americans assess the inflationary threat correctly.

However, it is far from reality, thanks to the strength of the labor market and the broader performance of the US economy. Employers have created 14 million new jobs since Biden took office, the strongest job growth of any president ever. However, Americans believe the job market is just average, with 48% saying job growth has been around average and 31% saying it is unusually weak. Only 20% say it is unusually strong, which is what the employment data already shows.

The same applies to unemployment. When Biden took office, the unemployment rate was 6.3%. It’s now at 3.7%, close to a record low. The average unemployment rate over the past 75 years is 5.7%, so Biden is two percentage points ahead of the natural rate.

But people don’t see it that way. In our poll, 50% said unemployment was about average, and 24% said it was unusually high. Only 25% said the unemployment rate was unusually low, which is technically the correct answer.

Americans also underestimate the overall performance of the US economy compared to other countries. The U.S. economy has recovered from the coronavirus-induced downturn faster than almost any other developed nation, and U.S. GDP growth exceeds that of most peer countries. Inflation is a problem everywhere, and it is falling more quickly in the United States than in Europe or other regions. The United States sometimes has worse unemployment rates than other developed countries with deeper safety net programs, but unemployment in the United States is also relatively low.

However, when we asked how the US economy was doing compared to other developed countries, only 21% said it was doing better. 40% said they were doing about the same, while 38% said they were doing worse.

Americans are extraordinarily pessimistic, something that has puzzled economists for the past two years. It is no secret that rising prices have affected consumer psychology, especially when inflation peaked at 9% in June of 2022. But inflation is trending towards normal levels and wages, which were previously lower than inflation, are now rising faster than prices. The demand for workers is very strong, there are labor shortages in many industries, and inflation has clearly not stopped people from spending. GDP growth in the third quarter was 4.9%, driven largely by consumers buying things.

However, confidence levels have remained at stagnant levels since mid-2021, with the University of Michigan Consumer Confidence Index, for example, now lower than it was during the deepest part of the coronavirus-induced economic downturn in 2020. Americans are more pessimistic now than they were during the deepest part of the coronavirus-induced economic downturn in 2020. They were on it before. When a mysterious disease was killing thousands of people daily and the unemployment rate was 13%. Something is off.

The Wall Street Journal recently claimed that “sticker shock alone does not appear severe enough to explain the deep level of economic dissatisfaction.” Writer Greg Epp speculates that “referral pain” may be part of the explanation: Americans are so troubled by divisive politics, mass shootings, foreign wars, and other problems that they project the same gloom into their views of the economy.

Perhaps, but the Yahoo Finance/Ipsos poll suggests that many Americans don’t even know basic facts about the state of the US economy. Biden must feel like he’s certainly not to blame for this, given that he gives speeches all the time talking about the labor market and the US’s rapid recovery from the coronavirus. If people are listening to Biden, they don’t seem to believe him. If they don’t even listen to Biden, this may be the first problem he needs to address.

Ipsos polled 1,103 registered voters for Yahoo Finance from October 20 to October 22.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.

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