Pessimism about the economy is about both partisanship and prices
It is no wonder, then, that polling from YouGov conducted for The Economist found last month that 58 percent of Americans think the economy is getting worse. That pessimism matches (and, in recent weeks, has surpassed) the pessimism at the outset of the coronavirus pandemic. Before then, the highest measured pessimism came at the beginning of Barack Obama’s presidency, as the country was recovering from the Great Recession.
You can see the shift below. The effect of the pandemic about three-quarters of the way through Donald Trump’s term in office is obvious; confidence in the economy plummeted. It recovered for a bit before dropping off again. Then, soon after President Biden took office — and as the pandemic seemed to be receding for good — optimism returned. Until it didn’t.
An inextricable part of this is partisanship. If we separate out the parties in the YouGov polling, you can see how much views of the economy depend on party. During Obama’s presidency, Democrats were pretty confident in the economy while Republicans were extremely pessimistic. Then Trump took office and positions quickly flipped.
The pandemic prompted everyone to be more pessimistic, but Republican confidence recovered fast … until Trump lost reelection. Republican pessimism quickly returned.
Part of the challenge for Biden is that Republicans are less likely to offer a grudging assessment that things are “about the same” — essentially a win for a Democratic president. But part of it, too, is that Democrats themselves are less likely to be uniformly positive about how things are going. There was no YouGov poll conducted during Obama’s second term in which Democrats were more pessimistic than optimistic about the economy. There have been 13 such polls for Biden this year.
Despite the media’s focus on various economic indicators, these partisan views are often unhitched to actual economic data. For example, there’s no strong correlation between the change in stock prices in a month and the number of Americans saying they’re positive about the direction of the economy. On the charts below, showing net views of the economy (those thinking things are getting better minus those thinking it’s getting worse) sank at the beginning of the pandemic along with stock prices. Otherwise, the movement isn’t clearly linked (visually or mathematically).
One challenge here is that the pandemic was such a shock to the system that it tends to break the scale of things like employment change. But notice the subtle drop in jobs at the very left end of the “change in employment” chart below and how that correlated to pessimism about the economy. Except for the pandemic period, there’s no other obvious link.
If we look just at the period during which Biden has been president, the correlation between stock prices and positivity on the economy is slightly stronger. The correlation between job growth and views of the economy goes from nonexistent to slight.
Then we get to inflation, measured with the consumer price index. The CPI has been up every month since the pandemic hit, with the increases during Biden’s term being substantially larger. And CPI increases correlate more than any other factor to the overall view of the economy since the beginning of 2021, albeit inversely. (That is, inflation goes up, optimism goes down.)
Biden supporters will likely point out that a focus on inflation is helping to push views of the economy south. It’s hard to disentangle actual increases in inflation from coverage of inflation, for obvious reasons, making this theory both appealing and hard to disprove. I’ll note, though, that while Fox News has talked more about inflation than CNN or MSNBC, cable news mentions of inflation per month are no more strongly correlated to views of the economy than the actual inflation numbers. (For what it’s worth, which is admittedly not much.)
Unfortunately for the president, inflation has a tangibility that employment doesn’t. If you have a job, you are probably less aware of the fluctuations of the job market. But nearly everyone notices more expensive food and gas — even Democrats.
Partisanship is part of what’s driving pessimism. As you might expect, prices are clearly part of it, too.