A majority of Americans think that the U.S. economy is heading in the wrong direction, according to an exclusive poll for Newsweek, with many blaming Joe Biden‘s economic agenda—Bidenomics—for it.

But experts told Newsweek that the U.S. economy is doing relatively well, especially when compared to most other Western economies. The negative outlook on the economy that many Americans hold is likely linked to the fact that the economic picture is objectively complicated and hard to understand right now.

“The combination of economic indicators is confusing even for economists who spend all their time looking at these numbers,” Stephan Weiler, a professor of economics at Colorado State University, told Newsweek. “This is just a very unusual combination of fiscal monetary and global circumstances, and that uncertainty is translating into pessimism.”

According to John Van Reenen, Ronald Coase Chair in Economics and School Professor at the London School of Economics (LSE) in London and Digital Fellow, Initiative for the Digital Economy at the Massachusetts Institute for Technology (MIT), part of the unhappiness with the U.S. economy is also a “hangover” from the rise of inflation which followed the pandemic.

“Prices are coming down but that increase is still fresh in people’s memories,” he told Newsweek. “Governments all over the world are being punished for that bad experience, and I think that’s part of what’s happening in the U.S.,” Van Reened added. “It’s ironic, because, compared to other advanced countries, the U.S. is doing fantastically well in terms of growth.”

Many Americans, however, don’t see it like Van Reenen.

Their widespread pessimism is reflected in the results of a Redfield & Wilton Strategies poll conducted on behalf of Newsweek on April 11. According to the survey, some 50 percent of Americans believe that the U.S. economy is heading in the wrong direction, while only 25 percent said it is going in the right direction.

Americans are also negative about their own financial situation. Some 42 percent of respondents said their financial situation has worsened in the last year. Only 26 percent said it has improved, while 32 percent said it has stayed the same.

Some 47 percent of Americans said they were now financially worse off than they were three years before, against 26 percent who said they were better off and 27 percent who said they were about the same. Some 45 percent said they were now worse off than before the pandemic, while 28 percent said they were better off and 27 percent were about the same.

The poll was based on interviews with 1,500 eligible voters in the country.

But despite the malaise shared by millions of Americans, economists insist that the U.S. economy “is in a relatively good place,” as Weiler said.

“The fact that we’re talking about a soft landing coming out of a pandemic—an event that would normally be followed by a huge economic fallout—instead of a recession is tribute to the fact that there was both good monetary policy and fiscal policy during the key periods of 2020, 2022 and 2023,” he added.

Here’s how the economy is doing, explained by Weiler and Van Reenen.

Inflation Is Stubborn But Remains On Its Way Down

Inflation is now much lower than in the summer of 2022 when it reached a peak of over 9 percent. But the latest data shows that it remains stubborn: in March, inflation rose by a stronger-than-expected 3.5 percent, higher than February’s year-over-year 3.2 percent increase.

“Inflation hasn’t come down by as much as the markets were expecting, that’s true,” Van Reenen said. “And there’s been some revisions about expectations of interest rate cuts. That’s going to be a bit of a headwind, but if you look at core inflation, it still seems to be coming down over the last six months compared to what it was before,” he added.

While consumers are now paying more for things like gas prices, car repair costs and car insurance, the cost of other goods—including grocery—have been flat for months and only went up by a modest 1.2 percent in the last year. In short, it doesn’t look like inflation is on its way to climb back up—which means the Federal Reserve is still likely to cut interest rates this year.

“That might not happen as quickly as I thought, but it’s not been a dramatic revision,” Van Reenen said of the latest data. “I think the overall picture is still a strong one.”

Wages Are On The Rise, But Americans Have Less Savings

The strong U.S. labor market has allowed the economy to remain strong and consumers to continue spending even as their savings started to dwindle after the pandemic.

“Americans say the economy is bad, but they keep spending like the economy is good,” Weiler said. “Pre-COVID, personal savings were at about 4 percent of income. In the most recent readings, it was down to 3.2 percent of income.”

Americans’ eagerness to spend—sometimes beyond their means—even as they remain profoundly pessimistic over the state of the U.S. economy has baffled economists, though their you-only-live-once attitude (YOLO) can be explained as a reaction to the shared dramatic experience of the pandemic.

The fact that Americans’ spending ability hasn’t been completely eroded by the rise of inflation in the past couple of years, on the other hand, is mainly due to the labor market and the rise of wages, which have been growing faster than inflation in recent months.
Employers in the U.S. added 303,000 jobs in March and nearly three million in the past year. The unemployment rate dipped to 3.8 percent in the same month. Wages went up by 0.3 percent from the previous month and 4.1 percent year over year. Biden described the report as “a milestone in America’s comeback.”

In April, there was a slight slowdown in the pace of hiring: employers added 175,000 jobs and unemployment ticked up to 3.9 percent. But overall, even as the job market shows signs of slowing, the numbers are still positive.

“Relative to inflation, wages and salaries are actually doing relatively well,” Weiler said. If Americans don’t see these as positive indicators for the U.S. economy overall, it’s because they “believe they have earned their wages and salaries themselves, while the country is responsible for inflation,” Weiler said.

“Whoever is running the country is letting them down by having inflation increase. They don’t see that the two are actually related,” he added.

The Hottest Issue Of The Year

Some 59 percent of respondents to the Redfield & Wilton Strategies/Newsweek poll said that the most important issue in the country today is the economy. That was up from 56 percent who said the same the month before—so we know that this is going to be a very big issue at the November election.

Whether the current state of the U.S. economy is going to favor Biden or his rival Donald Trump is likely to depend more on voters’ opinion of it rather than what’s actually going on.

Some 48 percent of respondents to the poll for Newsweek think that Biden’s economic agenda—Bidenomics—is actually moving the U.S. economy in the wrong direction, while 27 percent think it’s helping stir it in the right direction.

Economists disagree. “I actually think that the Biden administration did an important job of getting us out of what could have been a pretty serious COVID-19 recession,” Weiler said. “I think that the stimulus that they [the Biden administration] passed soon after he took office was actually important in keeping us from having a recession.”

According to Van Reenen, what Americans are saying in response to questions and surveys “is different from what they’re actually experiencing. And the reason for that, I believe, is just the intense polarization that we have in the U.S.”

The MIT economist said there’s evidence that “if you’re a Republican, even if you’re doing well, you say you’re not doing well because you don’t like President Biden’s. And it was the same, reversed, when President Trump was in power.”

People’s perception of the economy is going to be very important in November, Weiler said, but “I personally don’t think that the Biden administration has much responsibility for the economy at this point anymore.”