In 2022, Republicans seemed to have an easy path to regaining the White House, no actual policy proposals required. All they had to do was contrast Donald Trump’s economic record — which they portrayed as stellar — with the lousy economy under President Joe Biden.
That rosy view of the Trump economy involved a lot of selective forgetting — more about that in a minute. But the Biden economy was indeed troubled for much of 2022, with the highest inflation in 40 years. Jobs were plentiful, with unemployment near a 50-year low, but many economists were predicting an imminent recession.
Since then, however, two terrible things have happened — terrible, that is, from the point of view of Republican partisans. First, the economy has healed: Inflation has plunged without any major rise in unemployment. Second, Americans finally seem to be noticing the good news.
Before I get to that, however, let’s talk for a second about Biden’s predecessor. How can people claim that Trump presided over a great economy when he was the first president since Herbert Hoover to leave the White House with fewer Americans employed than when he arrived?
The answer, mainly, is that Trumpists want us to give him a mulligan for 2020, when the economy was devastated by COVID-19. Strangely, though, they don’t want to give Biden a similar mulligan for 2021-22, when lingering disruptions from the pandemic played a large role in inflation. (Those disruptions finally eased in 2023, leading to last year’s “immaculate disinflation.”)
Yet Trumpists don’t want to forget 2020 entirely. They still talk about how gasoline cost less than $2 a gallon, which was true for only two months in 2020 — months when the unemployment rate was more than 13%. Funny how that works.
Perception vs. reality
But back to the Biden economy, real and perceived.
Inflation has come down really fast over the past year. For technical reasons related to the way it treats housing, the consumer price index is a lagging indicator; other measures suggest that we’re already close to the Federal Reserve’s target inflation rate of 2%. And as I’ve already mentioned, this plunge in inflation has taken place without any big rise in unemployment, which has been under 4% for almost two years.
Yes, the economy remains riddled with inequality and injustice. But it’s looking a lot better, with real wages rising and inequality falling.
Until recently, however, Republicans could take comfort in the fact that the most widely cited indicator of consumer sentiment, from the University of Michigan, remained stuck at levels that in the past were associated with high unemployment, inflation or both. Other indicators showed some improvement but were still depressed.
Oddly, surveys have consistently shown most Americans feeling pretty good about their own financial situation. But they insisted that bad things were happening to the economy — that is, other people. Commentator Kyla Scanlon coined the term “vibecession,” now widely used to mean a situation in which negative views about the economy don’t seem to match up with the data.
But the vibecession may be coming to an end. The Michigan index has soared over the past two months, while expected inflation has plunged. Suddenly, Americans are sounding more positive about the economy.
Not so bad after all
It’s true that overall consumer sentiment still looks weaker than it did in late 2019, when both unemployment and inflation were similar to their current levels. But much, maybe most, of this gap reflects partisanship. Supporters of both parties tend to have negative economic views when the other party holds the White House, but the effect is much stronger for Republicans. According to the Michigan survey, Republicans, on average, consider current economic conditions roughly as bad now as they were in June 1980, when inflation was more than 14% and unemployment was more than 7%.
From a political point of view, what this means is that overall consumer sentiment is being held down largely by people who would never consider voting for Biden in any case. What matters are the perceptions of persuadable voters and Democrats who might have stayed home in the face of a bad economy. And these perceptions are almost surely moving in Biden’s direction.
If the vibecession is ending, why? One answer is that good news takes time to filter into public perceptions. I mean, even some professional economists haven’t caught up and are still talking about stubbornly high inflation; we shouldn’t have expected everyday people’s perceptions to turn on a dime.
Beyond that, I suspect that economic perceptions are being influenced by the stock market, which has recently reached record highs. The truth is that the market is a very bad guide to the economy’s future, but it’s highly visible. Furthermore, it influences the tone of news coverage of the economy, which has been very negative under Biden but may be improving.
Will economic perceptions actually end up being a plus for Biden? Probably not. But if Trump was counting on perceptions of a bad economy to hand him victory, reality seems disinclined to cooperate.
Paul Krugman is a New York Times columnist.