Explaining Americans’ pessimism about a strong economy

[CAMBRIDGE] The United States is in unusually good economic shape nowadays – no recession in sight. But it seems to be enduring a “vibecession”: public-opinion surveys show broad dissatisfaction with the economy and US President Joe Biden’s stewardship. What explains this disconnect between performance and perception? At least six answers – some far more credible than others – have been advanced.

The first is that there is no disconnect at all; the positive economic indicators are wrong or misleading, and the true state of the US economy is as poor as public opinion indicates. This explanation is simply wrong. While any given number can be subject to measurement error, a wide variety of statistics – covering economic growth, labour-market strength (jobs created or unemployment), and inflation (consumer price index or personal consumption expenditures, either headline or core) – have been collected, largely separately. And they overwhelmingly paint a very positive picture.

The second possible explanation – offered by economist Paul Krugman and others – is that the negative survey results reflect Republican partisanship. Though one might assume that Democrats and Republicans are equally partisan, Republican poll respondents actually tend to be much more heavily influenced by which party controls the White House. When Republican Donald Trump succeeded Democrat Barack Obama, Republicans were suddenly reporting far higher satisfaction with the economy. When Democrat Biden took over, they again became fixated on the supposed economic deprivation of American households. Poll responses by Democrats tend to follow economic indicators more closely.