President Biden faces two economic challenges as he campaigns for reelection next year. The first is getting inflation down and helping Americans regain some of the purchasing power they’ve lost since prices began shooting up in 2021. That will probably happen slowly as inflation continues the downward trend that’s been in place since last year, assuming wages hold up.
The second problem may be more confounding: getting Americans to appreciate what is going right in the economy. Biden continually talks up the booming job market and all the public investment the government is making under his watch, and voters keep showing no enthusiasm whatsoever. Biden’s approval rating sank as inflation skyrocketed in 2022, and it hasn’t improved at all since then, even though inflation has dropped by more than 5 percentage points.
A new Yahoo Finance-Ipsos poll reveals some of the misconceptions people have about the economy. Americans are firmly aware of inflation, which hit a 40-year high in 2022. When we asked what people thought of inflation, 88% said it was unusually high. Americans correctly assess the inflation threat.
They’re off the mark, however, on the strength of the job market and the broader performance of the US economy. Employers have created 14 million new jobs since Biden took office, the strongest job growth under any president, ever. Yet Americans think the job market is only so-so, with 48% saying job growth has been about average and 31% saying it’s unusually weak. Only 20% say it’s unusually strong, which is what the employment data actually shows.
The same goes for unemployment. When Biden took office, the unemployment rate was 6.3%. It’s now 3.7%, close to a record low. The average unemployment rate of the last 75 years is 5.7%, so Biden is outperforming the norm by a solid 2 percentage points.
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 is unusually low, which, technically, is the right answer.
Americans also underrate the overall performance of the US economy compared with other countries. The US economy bounced out of the COVID downturn faster than virtually every other developed nation and US GDP growth exceeds that of most peer countries. Inflation is a problem everywhere, and it’s coming down faster in the United States than in Europe or other regions. The United States sometimes has worse unemployment than other advanced nations with deeper safety net programs, but US unemployment is relatively low too.
Yet when we asked how the US economy is doing compared with other developed nations, only 21% said it was doing better. Forty percent said it was doing about the same, and 38% said it was doing worse.
Americans are exceptionally gloomy, which has puzzled economists for much of the last two years. It’s no secret that rising prices have walloped consumer psyches, especially when inflation peaked at 9% in June of 2022. But inflation is headed back toward normal levels and wages, which fell behind inflation, are now rising faster than prices. The demand for workers is so strong that there are labor shortages in many industries, and inflation clearly hasn’t stopped people from spending. Third quarter GDP growth was a rollicking 4.9%, largely driven by consumers buying stuff.
Yet confidence levels have been at recessionary levels since the middle of 2021, with the University of Michigan Consumer Sentiment Index, as one example, lower now than it was during the deepest part of the COVID downturn in 2020. Americans are gloomier now than they were when a mystery illness was killing thousands of people per day and the unemployment rate was 13%. Something’s off.
The Wall Street Journal argued recently that “sticker shock alone doesn’t seem severe enough to explain the profound level of economic dissatisfaction.” Writer Greg Ip speculated that “referred pain” may be part of the explanation: Americans are so distraught with fractious politics, mass shootings, overseas wars, and other woes that they project the same gloom onto their views of the economy.
Maybe, but the Yahoo Finance-Ipsos poll suggests many Americans don’t even know the basic facts about the state of the US economy. Biden must feel that he’s certainly not to blame for that, given that he gives speeches all the time talking up the job market and the quick US recovery from COVID. If people are listening to Biden, they don’t seem to believe him. And if they’re not even listening to Biden, well, maybe that’s the first problem he needs to address.
Ipsos polled 1,103 registered voters for Yahoo Finance from Oct. 20 through Oct. 22.