As we approach another federal election cycle, there will be a lot of talk about the state of the economy. Are Americans better off, economically speaking, than they were when President Biden took office three years ago? Despite our having lived through a pandemic and the resulting unprecedented economic shocks, it still should be a straightforward question to answer. And according to most economists, it is. So what’s the problem? Americans don’t tend to agree.

A straightforward examination of macroeconomic data tells a clear story: Americans overall are better off today than they were when Biden took office. Unemployment is low and has been that way for a good stretch. The economy lost jobs when we shuttered businesses during the pandemic, but the jobs came back quickly and stayed. For the most part, people who want work can find it. The heightened inflation that plagued most of Biden’s presidency has now waned, and many experts are predicting that the Federal Reserve efforts to rein in inflation will succeed without necessarily causing the nation to dip into recession. 

Additionally, a study conducted by economist Claudia Sahm shows the same to be true when you look at survey data of household-level finances (rather than macroeconomic data). 

But many Americans aren’t buying it. According to surveys of consumer sentiment, which have historically tracked pretty closely with trends in macroeconomic data, Americans are seemingly distraught over current economic conditions. Data from the University of Michigan’s Surveys of Consumers suggests that consumer sentiment today is at a similar level with consumer sentiment during the Great Recession (in 2008 and 2009), and before that, during the late 1970s and early 1980s. 

But the difference, in absolute terms, between the economy today and the economy in those earlier periods is striking. In the late 1970s, inflation was at its peak—nearly double the recent levels of inflation. And economic life was nothing short of scary during the Great Recession, with Monday-morning announcements of over-the-weekend, emergency interventions from the federal government becoming commonplace. The complaints of Americans about today’s economy pale in comparison. 

In my recent conversation with Sahm for Sutherland Institute’s podcast, Defending Ideas, Sahm aptly described the contrast when she said, “How do you look around and say it’s [as bad] as the 1970s?” And yet, Americans seem to feel just as bad about the economy as they did back then.

While this unprecedented discrepancy between consumer sentiment and economic data remains a bit of a mystery, there are a few theories as to why we might be seeing it now.

First, some suggest that while inflation has come down considerably, consumers are still reacting to the heightened price tags they are seeing. With inflation as the dominant economic news story throughout the last few years, consumers couldn’t help but become aware of how their grocery store runs, gas-tank fill-ups and other shopping were leaving them with a higher bill than ever. 

This heightened focus on inflation may mean that consumers are loath to take their eyes off the price tags of the things they spend on every week and month. And while the news is reporting that inflation has come down, consumers aren’t seeing prices come down. That’s because lower inflation doesn’t mean lower prices, it means prices rising more slowly. 

Perhaps this misunderstanding, paired with the typical consumer not “adjusting” the prices they see to account for any increases in wages they’ve experienced over the same period, can explain some of the irritability that consumers are feeling over the economy. 

However, I think a likelier explanation is that innovation in media has forever changed the way that people formulate their views about the economy. In the past, Americans would have gotten their information about the economy from the evening news, newspaper articles on economic indicators, and—maybe more importantly—through personal experience. Consumer sentiment would likely have fallen during periods when the media was reporting disappointing economic news, but also when consumers were experiencing joblessness themselves or watching friends and family fail to find or keep jobs. Likewise, sentiment likely would have fallen as households found it more and more difficult to “make ends meet” due to inflation or other factors. 

All those sources of information are still in play for consumers today, but new, more polarizing sources of information also inundate consumers. In the latest bout with inflation, the topic of grocery prices saturated new media sources like Twitter, TikTok and Facebook. Since provocative information tends to get the most eyeballs in those types of media, I suspect that consumers are internalizing the news about inflation in a way they never have before. And perhaps that means they will also be “overreactive” to the news and inclined to hold on to the sentiment that comes from negative news longer than they would have in the past. 

Regardless of the cause, we seem to have entered a new era in data on economic sentiment. The way Americans are feeling about the economy may no longer be a meaningful predictor of the trajectory of the nation’s economy. And as we approach the presidential election this fall, we’ll likely see candidates playing off this new dynamic to gain support for their cause.