Why are Americans’ views on the economy so mixed?
Why are Americans’ views on the economy so mixed?
On Wednesday, the Federal Reserve announces what it’ll do with interest rates as it continues to tackle inflation. Meanwhile, middle class Americans’ views on the economy are pretty mixed, according to a new poll from Harris. The majority, 44% of respondents, say they’re stressed about the economy. That’s up 4% from a year ago. And 34% say they’re optimistic — up 8%. So, why is the economic picture so blurry?
The most stressful part of Alex Lober’s house is the kitchen.
“If we had a food pantry, I think that would save our collective mental health by 50%,” Lober said.
Lober, his wife and kid live in a two-bedroom house in Atlanta. They’d love to move into a bigger space. But with interest rates so high, it’s just not feasible right now. So, they’re storing food under the TV.
“That stuff usually gets pulled out by our two-year-old and sometimes you just have a few dented cans of tomatoes,” Lober said.
A few dented cans isn’t the end of the world. But it’s one of those frustrating, daily reminders of the tradeoffs Lober’s family has been making when it comes to housing, groceries and daycare, because after years of squirreling a few dollars away, “it just doesn’t feel like we’re building up those savings anymore,” Lober said.
The personal savings rate has dropped significantly from its historic pandemic high. It means the spending spree Americans have been on is a lot less fun or even doable. Especially now, since costs are significantly and permanently higher, said Isabel Sawhill, a senior fellow at the Brookings Institution.
“And they thought this was all temporary. And so pretty soon prices are going to come down again. And the fact that they haven’t come down is, I think, a surprise to them,” Sawhill said.
Change is hard. And it’s not fun, even if your raise does cover how much extra you’re spending at the grocery store.
“Some of it is just an adjustment process. You’ve got to make adjustments in your life and adjustments are always anxiety producing,” Sawhill said.
She said some of the anxiety will go away with time. And maybe it’s finally started to. Justin Wolfers, an economist at the University of Michigan, said the data point that 34% of people feel optimistic gets at that.
“More people are finding work. More people are starting businesses,” Wolfers said.
Plus, he said, it’s one thing for people to feel a certain way about the economy. But what matters is how they participate in it.
“The reality is if you want to measure how optimistic people are, possibly the best one is to look at their spending patterns,” Wolfers said.
If people thought there were dark stormy clouds around the corner, he said, they’d stop spending.
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