The matrix of consumer discontent

THE past two years have been very good for the US economy. Unemployment has crept up a bit, but not by a lot, and the employed share of Americans in their prime working years is higher than, to make a random comparison, it was at any point during the Trump years. At the same time, inflation has come way down, defying the pessimistic predictions of many economists.

Yet, Americans on average remain very negative on the economy. I’ve written about the puzzle many times, and this isn’t an effort to persuade people that they’re wrong. It is, instead, more of a forensic exercise. There have been many attempts to explain bad feelings about the economy but, as far as I can tell, fewer efforts to compare what, besides poor consumer sentiment, these different stories predict – and how good they are at doing so.

As I see it, people trying to explain consumer pessimism basically tell one of three stories: