In aggregate, the economy can be said to be on firm footing. Real GDP is expanding at a roughly 2% annual rate. Total non-farm payroll employment fell in July, but has been consistently expanding on a year-over-year basis since recovering from the COVID-induced shock. The stock market has been hitting new all-times highs.
Despite this, consumer sentiment has been, to put it mildly, in the toilet. It’s off its absolute low this month, but sentiment, as measured by the University of Michigan, is worse this summer than at any point in its history (which goes back to the late 1970’s): worse than post-9/11, worse than the Great Financial Crisis, worse than COVID.
Some say that politics and hyper-partisan perspectives are to blame for the dour national mood. From my perspective, there are real trends in the economy that can help explain this. Consumer sentiment is in poor shape because the consumer is in poor shape. We can look at this through the lens of three related but distinct charts:
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