(This (slightly edited) appeared as a commentary in today’s Albany Times-Union)
By most measures, for most Americans, our economy is doing quite nicely — growing strongly, with wages up, jobs aplenty, inflation waning, and the much-predicted recession nowhere in sight. Yet “consumer sentiment” surveys show a negative mood.
The Economist, in its 9/9 issue, presents one of its hallmark statistical analyses, with a broad array of economic variables (inflation, unemployment, gas prices, etc.) correlated against the consumer sentiment index. From 1980 through 2019, those economic factors predicted 86% of the variation in sentiment — “a very good fit.” Such correlation being logical, after all.
But the relationship broke down, the model’s predictions becoming “wildly inaccurate” with the 2020 onset of Covid. And it has not recovered as the pandemic receded. The Economist’s model says that, based on historic correlations, consumers today should be feeling much better than they do.
Interestingly, however, while consumer sentiment is in the toilet, their spending has not suffered. The Economist says that actions speak louder than words, and its model does continue to predict spending quite well. Indeed, strong consumer spending is a key factor propelling the robust economy. And negative consumer sentiment doesn’t now presage an economic downturn, as it would typically have done in the past.
Trying to explain what is going on, The Economist concludes that while the economy recovered from Covid, the national mood did not; the gap between economic reality and sentiment has at least stopped growing and has stabilized; hence “bad vibes may be the new normal.” But why?
Many Americans do seem to have fallen into a sour, cynical, negative mentality. Recalling Jimmy Carter’s 1979 “Malaise” speech (which never used that word). While the pandemic did have something to do with such recrudescence, broader socio-cultural trends also play a role. The “bowling alone syndrome” has eroded communal feelings. Individualism veering into solipsism and alienation from our fellows. Social trust, and confidence in any figures of authority, are declining. Many people no longer believe anything is working the way it should.
The (not unrelated) political atmosphere too looms very large here. The “stolen election” lie further undermines public trust. Some say Trump was more symptom than cause, capitalizing on trends already afoot. Partly true, yet it’s difficult to overstate his malign influence. Metastasizing a politics of grievance, resentment, and just plain ugliness.
Convincing his cultists that the country is so screwed up that overriding democratic norms and civic decency, and even violence, may be justified. While the other side thinks the country is indeed screwed up precisely due to the Trump phenomenon.
All these mentioned factors bleed over into feelings about the economy, negating its factual realities.
Thus President Biden’s approval ratings languish under water, despite the objectively good economy, as well as all his important legislative and international accomplishments. Given the “malaise” that’s taken hold, it’s hard to imagine any leader getting high marks any more. And half of voters seem prepared to chuck Biden in favor of the guy who tried to overthrow the previous election. If that happens, then we’ll see just how screwed up this country can get.