Voters see a bad economy even when they’re doing well

The fastest inflation in four decades makes Americans feel bad about the economy, even though their own finances have held up relatively well so far.

Only 10 percent of registered voters say the U.S. economy is “good” or “excellent,” according to a New York Times/Siena College poll — a remarkable degree of pessimism at a time when wages are rising and the unemployment rate low for almost 50 years. But the rapidly rising costs of food, gas and other necessities are negating wage increases and undermining living standards.

Americans’ grim view is bad news for President Biden and Congressional Democrats heading for this fall’s midterm elections, as 78 percent of voters say inflation will be “extremely important” when they go to the polls. to go.

It can also be bad news for the economy. A long-term index of consumer confidence recently bottomed out, and other surveys also show that Americans are becoming increasingly nervous about both their own finances and the wider economy.

Economists have long studied the role of consumer confidence, which can be driven by the media stories and indicators that are not representative of the broader economy, such as certain grocery prices or shortages of certain goods. At least in theoryeconomic pessimism can become self-fulfilling as consumers cut spending, leading to layoffs and ultimately a recession.

Christina Simmons grew up poor and worked hard to give her 7-year-old son a better life. She moved up at the health insurance company she works for near Jacksonville, Florida, and has more than doubled her salary in recent years. Still, she feels like she’s falling behind.

“I did my best to get to where I am now so I could go on vacation with my son,” she said. “We’d go away for the weekend and take a hotel room in a different state, and go for a walk and see a waterfall and order a pizza in a hotel room and everything. And I just can’t do that anymore.”

Ms. Simmons, 30, can still make ends meet, partly because she can save money on gas by working remotely. But she’s concerned about what could happen if the economy slows down and puts her job at risk — a consequence of promotion, she said, is that she’s further away from clients, making her more vulnerable to layoffs. She has omitted modest luxuries, such as a gym membership and going out with friends, to build up her savings.

“I’ll save the money in case it gets worse,” she said. “I’m stricter than necessary because I don’t know how it will go.”

Decisions like Mrs. Simmons’s, multiplied by millions of households, could trigger the recession she fears.

They can also have political ramifications. Ms. Simmons voted for Donald J. Trump for president in 2016 and then for Mr. Biden in 2020. But she plans to return to supporting Republicans in the congressional elections in November, largely because of the rising cost of living. She’s not sure how much responsibility Mr. Biden bears for inflation, she said, but she knows he’s failed to fix it.

Mr Biden and his advisers have argued that while inflation is a serious problem, the economy is strong in other ways. They point to the robust labor market, record-breaking recovery in economic output and wage growth that was fastest for low-paid workers. But those arguments failed to calm voters.

Even among Democrats, only 20 percent of voters said the economy was good or excellent; among independents, some of whom the Democrats must emulate if they want to retain control of Congress, that figure is only 8 percent. (Only 4 percent of Republicans say the economy is doing well.)

But while voters are pessimistic about the economy as a whole, many say their own finances are still doing relatively well. Forty-three percent of voters in the Times/Siena poll said their personal financial situation was good or excellent. Even among those who said the national economy was “bad,” a third of voters said they were doing well personally.

Jamie O’Regan earns a six-figure salary as director of alumni relations for a private Brooklyn school, and lives in a Jersey City apartment with a rooftop pool.

But Mrs. O’Regan, 38, is feeling the pinch of higher prices. As of July 1, her landlord increased her rent by $500 to $2,900 a month. She parted ways with her car, which cost $600 a month between parking, insurance, and loan repayment. Because she can work from home in the summer, she has saved $100 a week by not commuting. She would like to buy a house, but sees no possibility to do so and is now considering taking in a roommate.

“If I feel like I’m living paycheck to paycheck, how does the average person function?” said Mrs. O’Regan. “There doesn’t seem to be anyone who feels immune to this.”

Economists say weak consumer confidence is unlikely to turn an otherwise healthy economy into a sick one. But it can amplify or prolong an already bad situation. In marginal cases, an official recession statement – and the associated media attention – can lead to: clearly worse results than weak economies that narrowly escape recession.

For example, the relatively short recession of 1990 and 1991 had no obvious cause such as a bubble. For that reason, scholars have theorized it may have been fueled by poor national mood from the Gulf War, an oil price shock and the interest rate hikes.

However, the link between consumer perception and economic performance is not straightforward. Sentiment fell sharply after, say, the terrorist attacks of September 11, 2001, but actual spending recovered quickly, possibly because of a rally-around-the-flag effect that helped propel the economy quickly past the dotcom crisis.

However, unlike in 2001, the Federal Reserve is actively trying to slow down the economy, meaning Americans have good reason to be cautious. Wages are not keeping up with rising prices, the housing market is already starting to cool and consumer spending, adjusted for inflation, fell in May. Credit card balances are growing and defaults are on the rise, signs that some households are already struggling to pay their bills.

The Times/Siena poll found that higher income earners were concerned about the economy, but above all confident in their own finances. However, there are already difficult times among low-income earners and those without university degrees. More than 80 percent of voters who earned less than $50,000 said their personal financial situation was “poor” or “only fair,” compared to about 30 percent of those earning more than $100,000.

High gas prices eat away at the money Anna Walker earns as a driver for DoorDash in Southern California. At the same time, she notices that customers tip less, which she attributes to the stress of their own budget.

“We go out to dinner and we’re like, ‘Wait a minute, wasn’t this a dollar cheaper a few days ago?'” she said. “I have to earn more and more money.”

During the school year, Mrs. Walker, 50, drove from the time she dropped off her 11-year-old daughter at school until 7 or 8 p.m. Now, with school for the summer, her daughter rides with her – she can’t afford to send her to camp.

For now, Ms. Walker said she can make it work. But she is one crisis away from disaster.

“I feel like I’m in a good situation as long as I work,” she said. “But I know that once my car breaks down, I’ll be homeless.”

Ms Walker voted for Mr Biden in 2020 and considers herself a Democrat. But she said Washington’s failure to help families like hers has left her disillusioned and she no longer plans to vote in November.

“I don’t care if the House has more Republicans, more Democrats,” she said. “I don’t think those people care about us, to be honest.”

The Times/Siena survey of 849 registered voters across the country was conducted by phone from July 5-7 using live operators. The margin of sampling error is plus or minus 4.1 percentage points. Crosstabs and methodology are available here.