By many accounts, the US economy is firing on all cylinders—or at least a lot of cylinders. Inflation has eased markedly since last summer, real GDP has grown by nearly 17% since the pandemic-induced 2020 recession, and employers are set to add a record 4.5 million jobs in 2022, a hiring trend that surpasses the last. The Jobs Report continues into the new year after an explosive January week brought the unemployment rate to a 53-year low of 3.4%.
But all the good economic news in the world may not be enough to dispel Americans’ stubborn pessimism toward the economy, the stock market, and everything in between.
A majority of Americans are predicting a rise in inflation and interest rates over the next six months, and they are similarly pessimistic on the prospects for economic growth and stock market performance over the same period, according to a new poll released by Gallup Monday.
Last month’s CPI report extended the declining streak of annual inflation to six consecutive months, and year-on-year inflation now stands at 6.5%. But 67% of U.S. adults are predicting inflation will rise again in the first half of the year, including 39% who say it will “go much higher,” according to a Gallup poll that reported inflation between Jan. Collected results. 22. Nearly three quarters of Americans expect interest rates to continue rising over the next six months and drag down economic growth, and 43% say it will slow this year. As for unemployment, 41% of Americans say it will start trending upward in the next few months.
In light of the positive economic news of the past few months, many pessimistic economists, including former Treasury Secretary Larry Summers, have highlighted the economy’s prospects. And while recent forecasts have emphasized the strangeness and uncertainty of the current economic landscape, the latest Gallup results underscore the resilience of American despair as well as the widening gap between recent economic indicators and public perception of reality.
Good News
Highlighting the growing divide in economic views is the question of whether the US economy is currently in a recession. Nearly half of Americans say that, according to a January poll by Morning Consult, but right now most indicators are pointing to an economy that looks anything but recession-like.
Treasury Secretary Janet Yellen said in an interview with ABC’s “Good Morning America” on Monday that low unemployment and a strong labor market are generally not signs of a contracting economy.
“You don’t have a recession when you have 500,000 jobs lost and the lowest unemployment rate in more than 50 years,” he said, adding that right now the economy is looking “strong and resilient.”
Slower wage growth and weaker consumer spending in the last few months of last year also support the argument that inflation is coming down, although these same factors have also hurt American workers, and may lend to negative views on the economy. Is. , Inflation has been particularly difficult for the American middle class, which has had to dip into savings just to make ends meet.
Wages are projected to increase by 1% in the final quarter of 2022, and by 5.1% for the full year, but due to high inflation, real wages still declined by 1.2% last year.
pervasive pessimism
But if recent economic news points in a positive direction, why are most Americans still so pessimistic?
According to a Gallup poll, the tendency to link stock market performance with the economy may be a contributing factor. Markets have been bullish for the past year, in contrast to recent positive news around inflation and employment, and forecasts aren’t betting on a recovery until at least late 2023.
Only 31% of Americans polled by Gallup expect the stock market to recover in the first half of 2023, while a record-high 48% forecast it to fall even further as interest rates continue to rise.
Partisanship also played a role in Americans’ despondency, with Republicans expecting inflation to rise 23 percentage points more than Democrats. Republicans were also more likely to have pessimistic views of stock market performance, economic growth and employment.
Republicans are more gloomy about the economy than last year. While more than half of Americans rated their personal financial situation as good in a December poll by AP-NORC, 59% of Democrats rated the overall economy as “bad,” compared to 90% of Republicans.
President Biden has been regularly criticized by Republican lawmakers over the past year for his administration’s handling of inflation and public spending plans, including last year’s Inflation Reduction Act. But Biden is expected to double down on recent economic good news during Tuesday’s State of the Union address and during his potential 2024 re-election campaign.
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