Why Are People So Pessimistic About the Economy? Because…It Sucks

How Many People Think Things Are Doing Well? Go Ahead and Guess

Image Credit: WSJ + NORC

There are numbers, and then there are numbers. I came across one lately that should have made more waves.

What percentage of people would you say think the economy’s in excellent shape? Go ahead, guess. Now guess again.

Just 1%. That’s not a typo, that’s a real finding. Go ahead and chuckle. Now, this comes from a WSJ poll, so if you want to politicize it, go ahead. But I think it reflects reality, and we’re going to discuss just why.

What pops out at you about that number — after you’re done chuckling? A number of things pop out at the economist in me. First, 1% is indeed laughable because…it’s almost nobody. Second, 1% corresponds neatly to the number of winners in the economy — the by now cliche phrase of “the 1%.” The mega rich who became giga rich, the billionaires who buy comms platforms for their buddies to announce Presidential runs on and whatnot. Sure, they think the economy’s doing…fantastic!!

Now, this data is about America. But we could apply it almost anywhere else, and while the numbers might change a bit, the general theme would hold true. What’s that theme?

Just 20% of people say the economy’s in excellent or even good shape — while 80% say it’s in poor shape or not doing well.

So. Why are people so pessimistic about the economy? Because…it sucks.

I lied above. Apart from the giga-rich who are currently trying to destroy the planet, democracy, and life on it, there’s one other group of people who say the economy’s doing fantastically well. My fellow economists. LOL. That’s bewildering because, well, think about it. Here you have 99% of people saying the precise opposite. “Let them eat cake” begins to look like history repeating itself.

You see, when we ask people about “the economy,” it’s not some kind of abstraction. They’re not thinking in general terms. They’re thinking about their own lives and plights. So when you have 99% of people saying, no, the economy’s not excellent, while only the giga-rich — and economists — in the 1% who say everything’s great…something’s very wrong. At the very least, economists should be hearing people, because when 99% of people tell you something’s wrong, it probably is. Your statistics are probably an illusion.

Why are people so pessimistic about the economy? Because…it sucks. But what do I mean by that?

The economy sucks in every imaginable way right now. Except two. Those two go like this. It’s creating lots of “jobs,” and I put that in quotes for a reason we’ll discuss shortly (in brief, those jobs suck), and two, it excels at making the rich richer. Economists look at these two numbers — unemployment and “growth,” see nothing much wrong, and conclude, hey, wow, everything’s great. Meanwhile, literally everyone else, as in 99% of people, are groaning with pain, distress, anxiety, and despair.

The economy sucks in every imaginable way right now. Apart from those two. Let’s take those at the micro and macro levels.

At the micro level, sure, the economy is creating jobs. But they’re incredibly low quality ones. Largely, they’re concentrated in the industries in which jobs were cut during the heavy years of the pandemic — hospitality, retail, and so on. What the economy’s not doing is creating anything remotely resembling the stable, secure middle class jobs of yesteryear. It’s creating “low wage service jobs” — which are just what they sound like. And that’s when it does create jobs. This is a global problem, by the way — even in China, young people are in crisis, because the youth unemployment rate is about 20%. Think about that for a second.

Hence, the macro picture, which is incredibly bleak. Inflation’s skyrocketed to vicious levels — about half of it is greedflation, hence, the 1% who think the economy’s excellent, LOL. It’s so bad that the average price of a new car is about $50K. That’s more than the median yearly income, all of it. Because prices are so high, real incomes are falling — since wages aren’t rising anywhere near as fast. Sure, those at the very bottom — all those “low-wage service jobs” coming back after being slashed during the pandemic’s worst years — are seeing gains, but that’s the very, very, very bottom. And that’s from an incredibly low base. Nowhere in the economy, apart from the 1% who think the economy’s doing fantastically, do we see anything like…

Upward mobility. We have this absolutely shattering megatrend of four to five generations in downward mobility. That means that living standards are just plummeting. That’s what economists should be looking at — and the good ones do, like Joe Stiglitz or Partha Dasgupta or, well, little old me. But by and large, nobody much is looking enough at living standards, and seeing this ruinous fall.

But everyone’s….living it. If we keep on perusing that survey, we find some very good reasons why people are so pessimistic about the economy. Like this question.