Why Americans Feel Gloomy About the Economy Despite Falling Inflation and Low Unemployment (2023)

Inflation has reached its lowest point in two and a half years. The unemployment rate has stayed below 4% for the longest stretch since the 1960s. And the U.S. economy has repeatedly defied predictions of a coming recession. Yet, according to a raft of polls and surveys, most Americans hold a glum view of the economy. The disparity has led to befuddlement, exasperation, and curiosity on social media and in opinion columns.

The Disconnect Between Economic Indicators and Public Perception

Last week, the government reported that consumer prices didn't rise at all from September to October, the latest sign that inflation is steadily cooling from the heights of last year. A separate report showed that while Americans slowed their retail purchases in October from the previous month's brisk pace, they're still spending enough to drive economic growth.

Even so, according to a poll last month by The Associated Press-NORC Center for Public Affairs Research, about three-quarters of respondents described the economy as poor. Two-thirds said their expenses have risen, while only one-quarter said their income has. The disconnect between positive economic indicators and public perception poses a political challenge for President Joe Biden as he gears up for his re-election campaign. Polls consistently show that most Americans disapprove of Biden's handling of the economy.

The Lingering Effects of Inflation

Many factors contribute to the disconnect, but economists increasingly point to one in particular: the lingering financial and psychological effects of the worst bout of inflation in four decades. Despite the steady cooling of inflation over the past year, many goods and services are still far pricier than they were just three years ago. Inflation, the rate at which costs are increasing, is slowing, but most prices are high and still rising.

Lisa Cook, a member of the Federal Reserve's Board of Governors, captured this dynamic in recent remarks at Duke University. "Most Americans," Cook said, "are not just looking for disinflation" — a slowdown in price increases. "They're looking for deflation. They want these prices to be back where they were before the pandemic. ... I hear that from my family."

That's particularly true for some of the goods and services that Americans pay for most frequently: bread, beef, and other groceries, apartment rents, and utilities. Every week or month, consumers are reminded of how far those prices have risen.

The Importance of Rising Wages

Deflation, a widespread drop in prices, typically makes people and companies reluctant to spend and therefore isn't desirable. Instead, economists say, the goal is for wages to rise faster than prices so that consumers still come out ahead.

How inflation-adjusted incomes have fared since the pandemic is a complicated question because it's difficult for just one metric to capture the experiences of roughly 160 million Americans. Adjusted for inflation, median weekly earnings — those in the middle of the income distribution — have risen at just a 0.2% annual rate from the final three months of 2019 through the second quarter of this year, according to calculations by Wendy Edelberg, a senior fellow at the Brookings Institution. That meager gain has left many Americans feeling that they have made little financial progress.

The Impact on Everyday Americans

For Katherine Charles, a 40-year-old single mother in Tampa, Florida, inflation's slowdown hasn't made it easier to make ends meet. Her rent jumped 15% in May. Over the summer, to keep her electricity bill down, Charles kept the air conditioning off during the day despite Tampa's blistering hot weather. She has felt the need to cut back on groceries, even though, she said, her 16-year-old son and 10-year-old daughter "are at the age they are eating everything in front of them."

Charles, a call center representative with a company that handles customer service for Medicare and Affordable Care Act health plans, received a raise to $18.21 an hour two years ago. But it wasn't much of an increase. This month, Charles took part in a one-day strike against her employer, Maximus, seeking higher wages and more affordable health insurance.

Rising prices have been a key driver of a wave of strikes and other forms of labor activism this year, with unions representing autoworkers, Teamsters, and airline pilots winning sizable pay increases.

Other Factors Contributing to Public Discontent

While inflation is a significant factor, other elements also contribute to why many people are still unhappy with the economy. Political partisanship is one of them. With Biden occupying the White House, Republicans are far more likely than Democrats to characterize the economy as poor, according to the University of Michigan's monthly survey of consumer sentiment.

The country's increased polarization has also intensified the partisan divide. Additionally, the experiences of everyday Americans, particularly those at lower income levels, play a role in their discontent. Lower-income Americans have generally received the largest percentage wage gains since the pandemic. However, they typically face a higher inflation rate because they spend a greater proportion of their income on volatile expenses such as food, gas, and rent.


Despite falling inflation and low unemployment, many Americans still feel gloomy about the economy. Lingering effects of inflation, high prices for essential goods and services, and the disconnect between wages and rising costs contribute to public discontent. While positive economic indicators exist, addressing the concerns of everyday Americans and bridging the gap between perception and reality will be crucial for policymakers and leaders moving forward.

Keywords: Americans, economy, inflation, unemployment, public perception, wages, prices, discontent

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