President Biden is facing two major economic challenges as he gears up for his reelection campaign next year. The first challenge is tackling inflation and helping Americans regain their lost purchasing power. This will likely be a slow process as inflation continues to decline, assuming that wages remain stable.
The second challenge is getting Americans to recognize the positive aspects of the economy. Despite President Biden’s continuous emphasis on the booming job market and the government’s investments, voters have shown little enthusiasm. His approval rating dropped as inflation soared in 2022 and has not improved, even though inflation has decreased by over 5 percentage points.
A recent Yahoo Finance-Ipsos poll sheds light on some of the misconceptions that people have about the economy. Americans are well aware of inflation, which reached a 40-year high in 2022. When asked about inflation, 88% of respondents said it was unusually high, indicating that Americans accurately perceive the inflation threat.
However, Americans seem to underestimate the strength of the job market and the overall performance of the US economy. Since President Biden took office, employers have created 14 million new jobs, marking the strongest job growth under any president. Yet, 48% of Americans believe that job growth has been average, and 31% think it has been weak. Only 20% recognize that job growth has been unusually strong, which aligns with the actual employment data.
A similar pattern emerges when it comes to unemployment. When President Biden assumed office, the unemployment rate was 6.3%, and it has now dropped to 3.7%, nearing a record low. On average, the unemployment rate over the past 75 years has been 5.7%, meaning that President Biden’s performance exceeds expectations by a solid 2 percentage points.
However, the majority of Americans fail to see this progress. In the poll, 50% of respondents believe that unemployment is average, while 24% consider it to be unusually high. Only 25% recognize that the unemployment rate is unusually low, which is the correct answer based on current data.
Furthermore, Americans underestimate the overall performance of the US economy compared to other developed nations. The US economy rebounded faster from the COVID-19 downturn than most other countries, and its GDP growth outpaces that of its peers. While inflation remains a problem worldwide, the United States has seen a faster decline compared to Europe and other regions. Although the US occasionally experiences higher unemployment than countries with more robust safety net programs, its unemployment rate remains relatively low.
Despite these positive indicators, only 21% of respondents believe that the US economy is performing better than other developed nations. Forty percent believe it is on par, while 38% think it is worse.
Americans’ pervasive pessimism has puzzled economists for the past two years. Rising prices have undoubtedly affected consumer sentiment, especially when inflation reached 9% in June 2022. However, inflation is now returning to normal levels, and wages, which lagged behind inflation, are rising faster than prices. The demand for workers is strong, leading to labor shortages in various industries, and people continue to spend. In fact, third-quarter GDP growth was an impressive 4.9%, largely driven by consumer spending.
Despite these positive economic indicators, confidence levels have remained at recessionary levels since mid-2021. The University of Michigan Consumer Sentiment Index, for instance, is lower now than during the deepest part of the COVID-19 downturn in 2020. Americans appear to be gloomier now than when the country faced a deadly pandemic and a high unemployment rate of 13%. This suggests that factors beyond economics, such as political discord, mass shootings, and overseas conflicts, may be influencing Americans’ perception of the economy.
The Yahoo Finance-Ipsos poll indicates that many Americans may not be aware of the basic facts about the state of the US economy. President Biden has been actively promoting the job market and the nation’s quick recovery from COVID-19, but people seem to distrust his message. Addressing this lack of trust should be a priority for President Biden if he hopes to change Americans’ perception of the economy.
The poll conducted by Ipsos surveyed 1,103 registered voters for Yahoo Finance from October 20 to October 22.
Rick Newman is a senior columnist for Yahoo Finance. He can be followed on Twitter at @rickjnewman.
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