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Wednesday, May 22, 2024

Majority of Americans wrongly believe US is in recession – and most blame Biden | US economy | The Guardian

Majority of Americans wrongly believe US is in recession – and most blame Biden

"Exclusive Harris poll for the Guardian shows 55% believe economy is shrinking, in troubling sign for president’s re-election bid

Graphic illustration of many slits of what look like printed paper, in mostly white, with a couple blue and a couple red.
The poll underscored people’s complicated emotions around inflation. Illustration: Marcus Peabody/Guardian Design

Nearly three in five Americans wrongly believe the US is in an economic recession, and the majority blame the Biden administration, according to a Harris poll conducted exclusively for the Guardian. The survey found persistent pessimism about the economy as election day draws closer.

The poll highlighted many misconceptions people have about the economy, including:

  • 55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.

  • 49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.

  • 49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.

Many Americans put the blame on Biden for the state of the economy, with 58% of those polled saying the economy is worsening due to mismanagement from the presidential administration.

The poll underscored people’s complicated emotions around inflation. The vast majority of respondents, 72%, indicated they think inflation is increasing. In reality, the rate of inflation has fallen sharply from its post-Covid peak of 9.1% and has been fluctuating between 3% and 4% a year.

In April, the inflation rate went down from 3.5% to 3.4% – far from inflation’s 40-year peak of 9.1% in June 2022 – triggering a stock market rally that pushed the Dow Jones index to a record high.

A recession is generally defined by a decrease in economic activity, typically measured as gross domestic product (GDP), over two successive quarters, although in the US the National Bureau of Economic Research (NEBR) has the final say. US GDP has been rising over the last few years, barring a brief contraction in 2022, which the NEBR did not deem a recession.

The only recent recession was in 2020, early in the Covid-19 pandemic. Since then, the US economy has grown considerably. Unemployment has also hit historic lows, wages have been going up and consumer spending has been strong.

But the road to recovery has been bumpy, largely because of inflation and the Federal Reserve raising interest rates to tamp down high prices.

Despite previously suggesting the Fed could start lowering rates this year, Fed officials have recently indicated interest rates will remain elevated in the near future. While inflation has eased considerably since its peak in 2022, officials continue to say inflation remains high because it remains above the Fed’s target of 2% a year.

After a tumultuous ride of inflation and high interest rates, voters are uncertain about what’s next. Consumer confidence fell to a six-month low in May.

So even though economic data, like GDP, implies strength in the economy, there’s a stubborn gap between the reality represented in that data – what economists use to gauge the economy’s health – and the emotional reality that underlies how Americans feel about the economy. In the poll, 55% think the economy is only getting worse.

Some have called the phenomenon a “vibecession”, a term first coined by the economics writer Kyla Scanlon to describe the widespread pessimism about the economy that defies statistics that show the economy is actually doing OK.

While inflation has been down, prices are at a higher level compared with just a few years ago. And prices are still going up, just at a slower pace than at inflation’s peak.

Americans are clearly still reeling from price increases. In the poll, 70% of Americans said their biggest economic concern was the cost of living. About the same percentage of people, 68%, said that inflation was top of mind.

The poll showed little change in Americans’ economic outlook from a Harris poll conducted for the Guardian on the economy in September 2023.

A similar percentage of respondents agreed “it’s difficult to be happy about positive economic news when I feel financially squeezed each month” and that the economy was worse than the media made it out to be.

Another thing that hasn’t changed: views on the economy largely depend on which political party people belong to. Republicans were much more likely to report feeling down about the economy than Democrats. The vast majority of Republicans believe that the economy is shrinking, inflation is increasing and the economy is getting worse overall. A significant but smaller percentage of Democrats, less than 40%, believed the same.

Unsurprisingly, more Republicans than Democrats believe the economy is worsening due to the mismanagement of the Biden administration.

Something both Republicans and Democrats agree on: they don’t know who to trust when it comes to learning about the economy. In both September and May, a majority of respondents – more than 60% – indicated skepticism over economic news.

The economy continues to present a major challenge to Joe Biden in his re-election bid. Though he has tried to tout “Bidenomics”, or his domestic economy record, including his $1.2tn bipartisan infrastructure bill from 2022, 70% of Republicans and 39% of Democrats seem to think he’s making the economy worse.

But it’s not all bad news for Biden. Republican voters were slightly more optimistic about the lasting impacts of “Bidenomics” than they were in the September Harris poll. Four in 10 Republicans, an 11 percentage-point increase from September, indicated they believe Bidenomics will have a positive lasting impact, while 81% of Democrats said the same. And three-quarters of everyone polled said they support at least one of the key pillars of Bidenomics, which include investments in infrastructure, hi-tech electronics manufacturing, clean-energy facilities and more union jobs.

Yet even with these small strands of approval, pessimism about the overall economy is pervasive. It will be an uphill battle for Biden to convince voters to be more hopeful.

“What Americans are saying in this data is: ‘Economists may say things are getting better, but we’re not feeling it where I live,’” said John Gerzema, CEO of the Harris Poll. “Unwinding four years of uncertainty takes time. Leaders have to understand this and bring the public along.”

Majority of Americans wrongly believe US is in recession – and most blame Biden | US economy | The Guardian

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