President Biden faces two economic challenges as he campaigns for re-election next year. The first is to bring down inflation and help Americans regain some of the purchasing power they’ve lost since prices began soaring in 2021. This will likely happen slowly as l Inflation will continue the downward trend in place since last year, assuming wages hold up. .
The second problem is perhaps more confusing: getting Americans to understand what’s going right in the economy. Biden continually talks about the booming job market and all the public investments the government is making under his leadership, and voters show no enthusiasm. Biden’s approval rating fell when inflation soared in 2022, and it hasn’t improved at all since then, even though inflation fell 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 in 2022 reached its highest level in 40 years. When we asked people what they thought about inflation, 88% said it was unusually high. The Americans correctly assess the inflationary threat.
However, they are missing the point, given the strength of the job market and the overall performance of the American economy. Employers have created 14 million new jobs since Biden took office, the strongest job growth ever under a president. Still, Americans think the job market is poor, with 48% saying job growth has been average and 31% calling it unusually weak. Only 20% say it is unusually strong, which is what the jobs data actually shows.
The same goes for unemployment. When Biden took office, the unemployment rate was 6.3%. It is now 3.7%, close to a historic low. The average unemployment rate over the past 75 years is 5.7%, so Biden exceeds the standard by 2 percentage points.
But people don’t see it that way. In our poll, 50% of respondents said unemployment was average and 24% said it was unusually high. Only 25% said the unemployment rate was unusually low, which, technically, is the correct answer.
Americans also underestimate the overall performance of the U.S. economy relative to other countries. The U.S. economy has emerged from the economic downturn faster than virtually any other developed country, and U.S. GDP growth is outpacing that of most comparable countries. Inflation is a problem everywhere, and it is falling faster in the United States than in Europe or other regions. The United States sometimes experiences more severe unemployment than other advanced countries with deeper social welfare programs, but unemployment in the United States is also relatively low.
Yet when we asked how the U.S. economy was doing compared to other developed countries, only 21% said it was doing better. Forty percent said the situation was about the same and 38% said the situation was worse.
Americans are particularly pessimistic, which has intrigued economists over the past two years. It’s no secret that rising prices have shaken consumer psyches, especially when inflation peaked at 9% in June 2022. But inflation has returned to normal levels and wages, which were lower than inflation, are now increasing faster than prices. The demand for workers is so high that there are labor shortages in many sectors, and inflation clearly hasn’t stopped people from spending. GDP growth in the third quarter reached a blistering 4.9%, largely driven by consumer purchases.
Yet confidence levels have been at recession levels since mid-2021, with the University of Michigan Consumer Confidence Index, for example, lower today than it was was at the height of the COVID recession in 2020. Americans are gloomier now than they were. when a mysterious disease was killing thousands of people every day and the unemployment rate was as high as 13%. Something is wrong.
The Wall Street Journal recently asserted that “sticker shock alone does not seem serious enough to explain the deep economic discontent.” Writer Greg Ip speculated that “evoked pain” might be part of the explanation: Americans are so distraught over divisive politics, mass shootings, foreign wars and other misfortunes that they project the same sadness onto their vision of the economy.
Maybe, but the Yahoo Finance-Ipsos poll suggests that many Americans don’t even know the basic facts about the state of the U.S. economy. Biden must think he’s certainly not to blame for this, given that he gives speeches all the time talking about the job market and America’s rapid recovery from COVID. If people listen to Biden, they don’t seem to believe him. And if they won’t even listen to Biden, well, maybe that’s the first problem he needs to address.
Ipsos surveyed 1,103 registered voters for Yahoo Finance from October 20-22.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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