Americans no longer judge the economy by the unemployment rate, new newspaper says

Until 2020, Americans’ view of the economy was deeply tied to the unemployment rate. The pandemic has weakened that bond, finds a new working paper.

Why is this important: The article, titled “The Great Decoupling,” sheds light on a mood that is intriguing to many but not yet fully understood: Why are people so unhappy with the economy? despite the low unemployment rate.

  • Lately the blame has landed on record inflation. But this article complicates that view.

Past: Prior to 2020, each time the unemployment rate rose, Americans became more pessimistic about the economy. When the rate dropped and more people found jobs, we would become more positive.

  • These are the conclusions of a 2014 article, published by Darren Grant, an economist at Sam Houston State University.
  • He compiled survey data on Americans’ perceptions of the economy, dating back to the 1970s, and then examined how those polls related to indicators such as unemployment and inflation.

These polls were in line with these indicators – even predictive of subsequent revisions to government figures. “Consumer perceptions have been quite sensitive over the years,” Grant told Axios.

What’s new: Grant updated his research this year — updating his massive spreadsheet — to see if anything had changed. This has.

  • “The public doesn’t really take unemployment into account anymore like they used to,” he says.

And after: Grant’s research doesn’t definitively explain why this happened, but he hypothesizes that the huge amount of money the federal government sent to Americans to ease the COVID economic shutdown played an important role. .

  • When the unemployment rate was very high in 2020, families felt a bit more positive about the economy than they would have felt before. At the time, they were receiving unprecedented levels of money through enhanced unemployment and stimulus checks.
  • That disconnect seems to have shaken something about how Americans view the state of the economy, he says.

The bottom line: Not surprisingly, these transfers “somewhat decouple” economic sentiment from macroeconomic conditions, Grant writes.

  • “The biggest surprise,” he writes, “is the ferocity of the decoupling, which is very significant in historical terms and, to this day, still ongoing.”

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