If America had a national mood, it would be gloom.
Things aren’t so bad, according to the data. Yes, inflation has been a problem, but it’s coming under control and many other things are going right. The job market remains strong, unemployment is low, the economy is growing, and the ebullient Taylor Swift is Time’s Person of the Year.
Yet America seethes. The University of Michigan’s sentiment survey is at recessionary levels, nearly as bad as during the financial crash of 2008. President Biden’s approval rating is a weak 40% or so, even though Biden is right that job growth during his term has been the strongest under any president, ever. In a November Yahoo Finance-Ipsos survey, only 17% of respondents said they felt Biden’s policies have helped them, while 37% said they have hurt (and the rest said they have had no effect).
The disconnect between a relatively good economy and dismal consumer attitudes has puzzled economists, who point out that the same consumers who have a recessionary mindset continue to spend money, keeping the economy out of recession. Maybe inflation is so traumatic that the rising cost of rent, gas, or bacon simply freaks people out.
Here’s another theory: Americans are so overwhelmed with negative news that they’re more inclined than ever before to think things are terrible. In a new report for Moody’s Analytics, economist Matt Colyar finds that negative attitudes have intensified over the decades as the internet and digital communication have flooded people with news, much of it bad.
“Never before have subjective evaluations of the economy been so divorced from economic data,” Colyar wrote. “More people are encountering more news, and for a variety of psychological and commercial reasons, news tends to skew negative. The increase in the share of respondents saying they have heard news about changes in business conditions has been disproportionately distributed toward the unfavorable kind.”
Consumer psychology began to diverge from firmer economic data around 20 years, ago, as the digital revolution was transforming the economy. The Michigan sentiment survey, which dates to 1978, illustrates the growing impact of negative news. In 1980, inflation hit a post-war high of 14.6%. Around the same time, the portion of respondents in the Michigan survey saying they had heard negative news about higher prices peaked at 20%.
Drop Rick Newman a note, follow him on Twitter, or sign up for his newsletter.
In 2022, inflation hit 9%, which was the highest level since 1980. The portion of survey respondents saying they had heard negative news about higher prices hit 38%. So the 2022 inflation peak was well below the 1980 peak, but the portion of people hearing about it was nearly double. News travels fast these days, bad news even faster.
Good news, meanwhile, gets buried. In the latest Michigan survey, the portion of respondents saying they’ve heard good news about employment is just 11%. Early in Biden’s presidency, it was 34%. Job growth has continued since then, with employment growing every month Biden has been in office. Yet high inflation overtook the booming job market as the dominant economic story, and good news about jobs simply isn’t getting through anymore.
It’s not just the Michigan survey. Colyar highlights growing discrepancies between “hard” data measuring economic outcomes and “soft” data representing people’s impressions in a prominent small-business survey, a key measure of manufacturing activity, and other reports. The trend is similar: a downer bias in which soft data measuring attitudes is more negative than hard numbers measuring the real economy.
That tracks with the views of many people who feel that digital overload is a malevolent force in society, with always-on smartphones and ubiquitous social media constantly reminding us of everything that’s going wrong. It’s also true, however, that we over-romanticize the past. Were things really better when three news networks and a handful of newspapers and magazines dominated the news?
In a way, it doesn’t matter, because nobody’s going to dial back technology. People win by adapting, and that includes politicians. Biden talks about the economy all the time, with a formula that’s become familiar: First he lists everything going in the right direction, such as strong job growth, pay raises for union members, and so on. Then he acknowledges that inflation, while down sharply, is still too high and there’s more work to do.
Biden’s upbeat bullet points clearly aren’t the ones going viral. Instead, people open their phones and learn about the $16 McDonald’s hamburger meal, eggcessive egg prices, and homes they’ll never be able to afford. Biden, 81, grew before up the avalanche of digitalia began burying people, but now it may be one of his most pressing challenges. The news isn't all bad, but it sure seems like it is.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
Click here for politics news related to business and money
Read the latest financial and business news from Yahoo Finance