Why Americans Are So Down on a Strong Economy

There’s a striking disconnect between the widely shared pessimism among Americans and measures that show the economy is actually robust. Consumers are spending briskly—behavior that suggests optimism, not retrenchment. Inflation has tempered. Unemployment has been below 4% for 24 straight months, the longest such stretch since the 1960s.

The disconnect has puzzled economists, investors and business owners. But press Americans harder, and the immediate economy emerges as only one factor in the gloomy outlook. Americans feel sour about the economy, many say, because their long-term financial security feels fragile and vulnerable to wide-ranging social and political threats.

Reliable steps up the economic ladder, such as a college degree, no longer look like a good investment. War overseas, and an emboldened set of hostile nations, have made the world feel dangerous. Uninspiring leaders at home, running a government widely seen as dysfunctional, have left people without hope that America is up to the challenge of fixing its problems.

While many groups of Americans have made gains during the pandemic recovery, some cracks have emerged.

Americans in lower-paying industries saw some of the strongest pay raises in recent years, but wage growth is now slowing overall, and more so for these workers. Research from the Federal Reserve Bank of Dallas found that low-income households disproportionately bear the brunt of inflation, in part because of the high share of their income that goes toward food, gas and rent.

While inflation has cooled substantially from its peak in 2022, wage growth only began to outpace price increases in mid-2023, meaning many Americans are still reeling from a long stretch in which it felt like their earnings couldn’t go far enough.