An enduring oddity of Joe Biden's presidency is that consumer confidence is weak and Biden’s approval ratings poor, despite record job gains and solid economic growth.
So, what’s going on? A new Federal Reserve analysis of household finances offers some clues.
In its annual survey of consumers, the Fed found that 72% said they were doing "at least OK" with their finances, meaning people were either "living comfortably" (33%) or "doing OK" (39%).
That's close to 2022's level of 73%, but is down sharply from 78% in 2021 and matches a low reached in April 2020. The last full year of data that saw this portion of consumers say they were doing "at least OK" was 2016.
And the portion of Americans who feel worse off than they did a few years ago — even if this rises by a little — could determine whether voters in this year’s presidential election think Biden deserves another term.
Here are four insights from the Fed’s latest analysis.
The pandemic still shapes consumer attitudes
As noted previously, the best level of financial fitness consumers reported during the last 11 years came in 2021, when 78% said they were doing at least OK. The second-best level came in July 2020 at 77%. But it wasn't because the economy was booming.
In 2020, the COVID pandemic was raging and many Americans were locked down at home. Things were better in 2021, after vaccines started rolling out, but the economy didn’t fully recover from the COVID setback until deep into 2022.
Here's what else was going on in 2020 and 2021: Americans received massive amounts of stimulus money, including checks from the government, aid to businesses, tax breaks for parents, and suspended payments for student loan borrowers.
Those programs are now basically over. Many Americans banked extra money during the pandemic, but economists think those “excess savings” are now fully depleted.
What consumers may really be saying is that they feel worse off now compared with the COVID years, when unprecedented amounts of federal aid produced an abnormal and temporary bubble of financial security.
The problem for Biden is a recency bias from voters, meaning a lot of folks won’t do an apples-to-apples comparison of their well-being now compared with pre-COVID levels.
They’ll simply feel the deterioration from the days when "stimmy checks" beefed up their bank balances, and blame the guy in charge.
Working parents are unusually stressed
One notable group that has been doing worse during the last year is parents.
The portion that said they’re "doing OK" financially dropped to 64% in 2023 from 69% in 2022. All others, excluding parents, stayed the same at 75%.
From 2021 to 2023, the portion of parents that said they’re "doing OK" dropped by 11 percentage points. Among the group representing everybody else, it dropped by just four points.
That could reflect one stimulus measure that substantially boosted the child tax credit, but expired at the end of 2021.
Census Department data shows the child poverty rate plunged to 5.2% in 2021 from 9.7% in 2020 — then jumped all the way up to 12.4% in 2022.
Most experts think these huge variations come from on-and-off COVID stimulus, including the child tax credit expansion. Biden and many Democrats want to make that expansion permanent, but they haven’t been able to get the votes in Congress.
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Food inflation is the worst
In the Fed's survey, 35% of respondents cited inflation as a problem, and the Fed highlighted food prices as a particular concern.
"When describing challenges related to inflation, many people mentioned the cost of food and groceries," the report explains. That’s similar to the findings of a November Yahoo Finance-Ipsos survey in which 67% of respondents said food inflation was hurting them the most. Gasoline came second, at just 15%.
Food prices have moderated, with the year-over-year inflation rate now just 1.1%.
As most consumers know, however, food prices are up 21% during the last four years, and they're likely not going back down. Consumers are largely stuck paying those higher prices.
Some things are going right
The biggest improvement from 2022 to 2023 was an increase among non-retirees who say their retirement savings plan is on track. That rose to 34% from 31%, and it’s probably higher now, given the stock market rally of the last six months.
As for retirees, they’re doing pretty well, with 80% saying they’re doing OK financially. That's the best of any demographic group in the study.
If they were the only ones voting in 2024, Biden might be in pretty good shape.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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