New YorkShopping cart inflation has cooled dramatically, but Tamira Flamer, 27, says she hasn’t noticed. What is clear to him is that paper plates and meat are even more expensive than a few years ago. “I feel like it’s been difficult,” says this mother of two who delivers for Amazon. She is one of the undecided voters in the United States who say they are most focused on economic issues, underlining that this is a challenge for Vice President Kamala Harris in the final stage of the presidential election. Polls suggest that Americans are relatively discouraged about issues that touch their pockets and that could take votes away from Democrats and benefit Trump.
Persistent pessimism is also something of a conundrum. The U.S. job market has moved forward, albeit more slowly. Global growth has been healthy and inflation has also more or less returned to normal. Data released on Thursday showed prices rose slightly by 2.1% compared to last year. Confidence has rebounded as inflation cooled, but remains much lower than the last time the economy looked this strong.
There’s a simple reason why many people still have doubts about the economy: thesticker shockthat is, the shock that makes us see how the price shown on the label of a product grows. Even though prices are growing much more slowly today, the costs of basic necessities such as food and shelter are much higher today than they were a few years ago. Many families still struggle to pay their bills. Indeed, surveys show that consumers understand that inflation is slowing. But they are also annoyed by the fact that prices are higher than before the pandemic; let them rise, although not so quickly.
“It’s not that they’ve lost touch with reality,” says Joanne Hsu, director of consumer surveys at the University of Michigan, adding that consumers often raise the issue of high prices in interviews. “High prices continue to impact their personal finances, and this is still very frustrating.” For many consumers, wages have risen faster than prices, but this is not true for everyone. Workers tend to see wage increases as something they have earned, while they see price increases as something that is applied to them, perhaps even unfairly.
Problems of access to housing
The supermarket isn’t the only place where prices are noticeably higher. Housing costs have increased significantly in recent years. For people hoping to buy their first home, affordability has become much more difficult since 2020. This is partly due to Federal Reserve (Fed) policy. Central banks have sharply raised interest rates in 2022 and 2023 to curb demand and control inflation. These high official financing costs translate into higher mortgage rates, making it much more expensive to buy a home with borrowed money.
Although the Fed cut interest rates in September, and is expected to cut them at least once more this year, analysts do not expect the central bank to reduce them to the lower levels that prevailed in 2020 and during throughout the 2010s. This decision is positive: the American economy is doing well. Even as consumers convey their unease on polls, they have demonstrated a willingness to continue spending, and US growth is much stronger than that of countries like Germany or China. Neither interest rates nor house prices are part of inflation – rents are – but housing is both the typical family’s largest expense and a crucial way to generate wealth and, ultimately, advance the country. This makes it important to the economic psyche of the nation.
US growth is much stronger than that of countries like Germany or China
Part of this bitter attitude boils down to simple partisanship. Republicans tend to be much more optimistic when a Republican is in office, and Democrats also tend to be slightly happier when a Democrat is in office. Since President Biden took office, the level of trust among Democrats in the University of Michigan index has averaged about 15% higher than when Trump was in the White House. Republican confidence, on the other hand, suffered a stunning 56% decline. Most of this decline occurred immediately after Trump lost the 2020 election, although there was a second, smaller decline after inflation began to rise.
Polls suggest that many Americans are prioritizing the economy when considering voting. A national survey on New York Times and Siena College, conducted in late October, found that 27% of participants ranked the economy as the most important issue in deciding their vote in this election, making it the No. 1 issue in the United States. Another 4% of voters prioritized inflation and the cost of living more than those who prioritized foreign policy, taxes or climate change. It could clearly be an economical choice, but a complicated one. While inflation cools, growth remains solid and Americans, however, are far from convinced.
Interview Between Time.news Editor and Economic Expert on Current Economic Issues
Editor: Good afternoon, everyone. I’m here with Dr. Joanne Hsu, the director of consumer surveys at the University of Michigan, to discuss some recent findings in consumer sentiment and the complexities surrounding inflation as we approach the final stages of the presidential election. Thank you for joining us today, Dr. Hsu.
Dr. Hsu: Thank you for having me. It’s a pleasure to be here and discuss these important issues.
Editor: Let’s dive right in. We’ve seen that inflation rates have cooled, yet many consumers, including individuals like Tamira Flamer in New York, still feel the pinch of rising prices, especially for essentials like meat and paper plates. Why do you think there’s such a disconnect between the data and what people are experiencing?
Dr. Hsu: This disconnect is a common phenomenon known as “sticker shock.” While it’s true that overall inflation has slowed down, the prices of basic necessities have increased significantly compared to pre-pandemic levels. Consumers are acutely aware of how much more they’re spending, and this ongoing concern overshadows the statistical improvement in inflation reports.
Editor: That makes sense. It’s interesting to hear that while wages have risen faster than prices for some, that isn’t the case for everyone. How does this disparity affect consumer sentiment leading up to the election?
Dr. Hsu: Absolutely. Many consumers view wage increases as a reward for their hard work, while price hikes feel imposed upon them, often unfairly. This fosters a sense of frustration and mistrust in economic policies that, despite showing improvements on paper, don’t translate to tangible relief for everyone. This could make them more inclined to support candidates who address their immediate financial concerns, which plays directly into the political arena.
Editor: Speaking of the political arena, Tamira also represents a demographic of undecided voters focused on economic issues. With polling indicating that economic concerns might sway votes away from Democrats and towards Republicans like Trump, how should candidates address these feelings?
Dr. Hsu: Candidates need to acknowledge the real, lived experiences of voters regarding economic hardship. It’s not enough to state that inflation is slowing; they must connect on a human level by discussing plans for cost-of-living adjustments and housing affordability. Messaging should emphasize understanding the stress voters are under while proposing concrete solutions to make life more affordable.
Editor: You mentioned housing affordability as a major issue, especially with rising mortgage rates due to Federal Reserve policies. How has this impacted first-time homebuyers, particularly younger generations?
Dr. Hsu: Housing affordability is indeed a significant hurdle. For many younger individuals hoping to buy their first home, the combination of high mortgage rates and increased home prices since 2020 has created an environment where homeownership feels out of reach. While recent interest rate cuts may help, analysts don’t expect rates to return to the low levels seen in the 2010s, which means the dream of homeownership may remain a distant goal for many.
Editor: As we look at this complex economic landscape, what do you see as the long-term implications for average consumers if these trends continue?
Dr. Hsu: If prices for essentials continue to climb faster than wages, we risk more families falling into financial distress. Housing remains the largest expense for most families, so if affordability doesn’t improve, we’re essentially stifling economic mobility. That could lead to greater social and economic divides, and we’ve already seen how frustration over economic issues can influence political outcomes. It’s entirely interlinked.
Editor: Absolutely, Dr. Hsu. Thank you for shedding light on these pressing issues and providing your insights. It’s evident that while we might see some positive trends in economic data, the real challenge lies in addressing the everyday realities for voters. We appreciate your time today.
Dr. Hsu: Thank you for the opportunity. It’s been a pleasure discussing these vital topics.