2024-01-22 06:08:02
When we look at the figures, there is reason to rejoice. The American economy has successfully navigated a perilous year. Inflation is falling, the unemployment rate is at a historic low and interest rate cuts are on the horizon.
Even the price of gasoline, which greatly influences the mood of Americans, is at its lowest in two years. And the stock markets are exulting. But the average American citizen thinks things are going badly.
But why are Americans so pessimistic about their super economy?, the magazine recently asked. The Economist.
Good question. Despite inflation and interest rate increases, the US economy has continued to grow at a good pace and its performance is expected to be better in 2023 than in 2022. Job creation exceeds expectations and wages are increasing at a rate higher than inflation.
The United States will probably achieve the feat of having gone through a period of high inflation without recession.
The consumer confidence index published each month by the University of Michigan is considered a good barometer of household morale. It increased in January for the second consecutive month, but remains at historically low levels.
Poll after poll shows that a large proportion of the American population believes that things are going badly. Many believe that the economy is in recession and that the inflation rate is increasing, even though it is actually falling. Three-quarters of Americans have a negative opinion of the economy, according to a recent poll Financial Times and the University of Michigan.
This dichotomy in Americans’ perceptions of the economy is not new, but it is growing, according to numerous research conducted on the subject, including that of Harvard University.
All kinds of reasons can be put forward to explain the phenomenon. The way the news is reported is one of them. What goes wrong makes headlines more often than what goes well. The risks of recession are mentioned more often than they materialize, and it is understandable that by hearing about it, many people end up thinking that it is a reality.
Likewise, announcements of layoffs are much more publicized than hirings and they contribute to fueling negative consumer perceptions, even when the unemployment rate is low and the economy is creating jobs.
The surveys also reflect what households are experiencing. In times of inflation, what matters are the prices we pay at the grocery store and in stores, not a consumer price index composed of a basket of goods and services that is intended to be representative, but which is different from one family to another. Since food prices, which affect everyone, have increased faster and more significantly than the average rate of inflation, it is easy to conclude that inflation is on the rise even if it is not not the case.
Growing polarization
What happens elsewhere in the news, outside of the country’s economic situation, can also increase negative perceptions of the economy. Shootings or climatic disasters can thus affect consumer confidence and their perception of economic reality. This disconnect between the perceived and the real is not unique to the United States.
Among our neighbors to the South, however, politics plays an increasingly important role in assessing the health of the economy. Polarization and misinformation amplify the disconnect. So, despite the numbers saying otherwise, supporters of the former and perhaps next president of the United States are convinced that there was more investment, more jobs and that the economy was doing better before the election of Joe Biden.
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