What's the biggest problem with the US economy right now? The vibes are off.
By almost any objective measure, Americans are doing much better economically than they were nearly three years ago, when President Joe Biden took office.
Still, a majority — 58% — say Biden's policies have made economic conditions worse, according to a new CNN Poll conducted by SSRS.
That's up from 50% a year ago.
But the grim outlook is at odds with the hard data, which reveal an economy bursting with optimism.
"Has the economy improved under Joe Biden? There's literally no question," said Justin Wolfers, a professor of public policy and economics at the University of Michigan.
In January 2021, the start of Biden's term, "everything sucked," according to Wolfers. Unemployment was at 6.3% and the economy had yet to rebound from the shock of Covid-19. Wolfers described that time as "one of the worst economic moments of my life."
Two-and-a-half years later, the US economy is in a much healthier spot.
Unemployment has been hovering near its lowest level in a half-century — roughly 3.5% — for the past 18 months. August marked the 32nd consecutive month of job growth. Real wages (adjusted for inflation) are rising. That's helped everyone feel confident about continuing to spend money, which keeps the US economic engine humming.
Put another way: People are spending like they're in a good mood, even if they say they're not.
"There's this disjunction between reality and perception that's as large as I've ever seen in my career," Wolfers told CNN. "If you'd fallen asleep in 2019 and woke up in 2023, you would discover pretty much the sort of economy you would have expected."
Economists are practically stumbling over themselves to revise their growth forecasts higher. Many banks are drastically rolling back or even reversing their expectations for a 2023 recession.
So, why the sour mood?
In short: Inflation, housing and bitter national politics.
The inflation hangover
Inflation in the past three years has jumped from around 2% to 9% and back down to about 3% now. That's taken a toll.
Even though prices have cooled significantly, prices overall are still about 18% higher today than they were in late 2019, before the pandemic.
Gas prices on the rise
Gas prices, which are notoriously volatile, tend to feel like a slap in the face because they are unavoidable — even if you don't drive, you see the prices on display outside every gas station.
Throughout 2022, gas prices were especially hard to predict as the Russian invasion of Ukraine jolted global commodities markets. Earlier this summer, US drivers were enjoying big savings on gas compared with 2022. But by late August — around the time the CNN poll was conducted — prices had climbed back up to their highest level in months, just shy of $4 a gallon on average.
Unaffordable housing
The economy feels extra crummy for people looking to buy a home.
Housing affordability is at its lowest point in decades, with mortgage rates climbing above 7% to their highest level in more than 20 years. When Biden took office, mortgage rates were at a record low of 2.65%.
The median US home price has risen to $416,100 from $258,000 in 2019.
But the affordability issue isn't just because of higher financing costs. It's also because of historically low inventory, thanks to a pandemic-era buying spree combined with a lingering shortage rooted in the 2008 subprime mortgage crisis.
The partisan gap
CNN's latest poll shows that Republicans and Democrats are both souring on President Biden's handling of the economy.
Only 2% of Republicans and 48% of Democrats said economic conditions had improved under Biden. Nearly a quarter of Democrats said Biden's policies have worsened economic conditions. Ninety-one percent of Republicans agreed.
"People are no longer telling us how they feel about the economy — really, they're telling us how they feel about the president," Wolfers said.
Bottom line
At the end of the day, the hard data won't matter for President Biden if voters don't feel like the economy is working for them.
"You can't jawbone people into feeling better," said former White House senior adviser David Axelrod on CNN This Morning. "I think the president has to find a way to talk about the things that he's done in a context other than kind of asking for a report card from the American people."
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