new york
CNN
—
Nathan Frederiksen is doing pretty well for himself.
He turns 40 this year and plans to retire by age 60. A suburban Boise, Idaho, man who drives the “least sexy car ever,” takes a DIY approach to home improvements, and doesn't eat out as often — saves 10%, though it takes some sacrifices. While supporting his wife and four children, he uses a portion of his income to fund his retirement and maintains an emergency savings fund.
“I've been lucky with some job prospects, but I'm not making a tremendous amount of money,” he told CNN. “I have a solid middle-class income.”
Although Frederiksen manages a small team of financial analysts, he believes his bank account is in good shape. But he doesn't feel the same way about the larger economy.
“It's definitely gotten tougher over the last few years,” he says. “We felt like our budget and spending was inflated, but we have some peace of mind knowing that if something were to go wrong, we would be in a pretty good position financially.”
he is not alone. A recent Wall Street Journal poll of U.S. voters in battleground states found that although they think the national economy is in bad shape, they feel their personal finances are in good shape. .
The majority of those surveyed (68%) said it's becoming harder for the average person to get ahead, and almost half of respondents said their finances are moving in the right direction.
Just a quarter of registered voters in seven major states – Arizona, Georgia, Michigan, North Carolina, Nevada, Pennsylvania and Wisconsin – said the economy has improved in the past two years, according to the magazine's poll.
This is not a new movement. A Gallup poll last April found that only 16% of people rated the economy as “good” or “excellent,” but those who said their personal financial situation was “good” or “excellent.” was 45%.
However, available data shows that the economy have Improved.
When President Joe Biden took office in 2021, the unemployment rate was 6.3%. Currently it is 3.8%.
In 2022, U.S. inflation (as measured by the Consumer Price Index) soared to 9.1%, a level not seen in 40 years. Today it is a more reasonable 3.2%.
U.S. gross domestic product, a broad measure of the economy, grew 2.5% in 2023, outpacing other developed countries. Financial markets finished the first three months of the year in great shape, with the S&P 500 alone hitting 22 all-time highs.
The growing disconnect between economic sentiment and economic data in the United States is well documented.
But the dichotomy between how people feel about their finances and the economy as a whole poses other challenges.
“It all depends on where people are getting their information,” says Ben Harris, director of Brookings' Economic Research Program. “I can assess my own economic situation without anyone's help. But when I want to assess a $20 trillion economy, I need the help of others. And I have a Ph.D. in economics. I have a number.”
Harris focuses on official data sources, “but I don't think the average American goes to the Bureau of Labor Statistics,” he says.
So where do they get their information from?
“Unfortunately, I think the answer lies increasingly in social media and biased cable news sources,” Harris said. “So if you go to TikTok or Facebook for macroeconomic information, there's a very good chance it's wrong.”
Jonathan Barricklow and his family are in a good financial position.
Mr. Barricklaw, a director at an automobile company in Bowling Green, Ohio, has even made significant cash investing in the stock market during the pandemic. But he was well aware that rising inflation was still putting a huge dent in other people's salaries.
Or so he thought.
Barricklow recently volunteered to run the concession stand during a gymnastics competition. This is our second year and we expected we would have to raise prices because inflation is so high. However, only two of his items have increased in price since last year.
“That was a shocking realization for us,” he said. “That percentage is actually only hovering at 3.5% for him, which is not an astronomical number.”
This prompted Barricklaw to take a closer look at her grocery bill.
“When you have growing kids, it's hard to keep track of your grocery bill, and the cost of everything always goes up. So I've seen my grocery bill creep up over time. ” he said. However, when comparing year-on-year, he found that the costs in 2022 and 2023 are about the same.
“It was an eye-opener. There's nothing wrong with that. But it's only the extreme stories that get publicized,” he said.
Harris said it's important to look at consumer behavior, not just sentiment, when determining how Americans feel about the economy.
Here's how consumers are actually behaving. Consumers continue to spend money at high interest rates, quit their jobs and invest in the stock market thinking they can find something better. These actions show that Americans, overall, actually feel pretty good about their economy.
Americans are still reeling from the effects of the pandemic that brought much of the U.S. economy to an abrupt halt. Many near-retirees told CNN that the shadow of the 2008 financial crisis and its impact on their savings still haunts their perception of the economy.
Additionally, geopolitical conflicts in the Middle East and Europe, turmoil surrounding the housing market, and election year uncertainty are worrying even the most prepared savers and creating unsettling uncertainty.
Dave Kolosky, 60, a building and home inspector in Erie, Pennsylvania, can't sleep at night thinking about the possibility of a stock market crash.
“It would be really painful if half of your retirement savings disappeared overnight over a period of one or two years,” he says. He thinks he can retire at 65, but he still has financial worries. He is concerned about stagnant incomes and inflation.
So why does anxiety about the future feel so real in the present?
Living with chronic pain actually reduces your pain tolerance, said Megan McCoy, a professor of economic therapy at Kansas State University. “All your nerves are hyper-stimulated and ready to react, which means you're actually worse at dealing with pain,” she says.
The same can be said about financial distress.
“We've been living in ambiguity for the last four or five years,” she says. “We've been waiting for the other shoe to drop, but that kind of anticipatory anxiety reduces our ability to deal with everyday stressors and small anxieties. We're already primed to react. Because of this, they may react strongly to economic news.”
McCoy recently conducted a survey of financial planning clients. The older the customers, the higher their net worth. Despite being guided by financial managers, 72% of his clients said they felt financially insecure.
Julie Levich, a single mother who turns 55 this week, works at a technology company in Scottsdale, Arizona.
The 2008 recession and subsequent medical bills “decimated” her finances, and she struggled to make ends meet for a while. “I once had a disturbing dream that I was retired and living in a box on the street,” she said.
But about 10 years ago, she started thinking seriously about her finances. She followed Suze Orman, joined Kiplinger's Personal Finance, and began making significant concessions so she could put 20% of her salary into a 401(k) account.
She was able to purchase a home at a 2.5% interest rate. The value has increased significantly. “My mortgage is now cheaper than what I would pay to rent a one-bedroom apartment in the same area,” she said.
But she's still worried. She saw friends in her industry discussing her layoff and looking for her job on LinkedIn, but she wasn't sure how the artificial intelligence boom would affect her industry. not.
She sees people around her struggling.
Levich is a member of a local bowling league in Arizona. Every Tuesday night, she gathers in an alley with about 100 other people. “A lot of those people are living on the edge of their finances. And I think they're struggling,” she said.
“I don't even talk about my personal financial situation because I think it would make them uncomfortable if I said, 'I'm doing great,'” Levich said.
“I think a lot of people I know and friends are really suffering,” she said. “I understand there's this 'everything is great' conversation, this elitist discussion about finance. People get angry when they hear that, and it doesn't work.”
But some Americans find themselves in Revich's position, finding themselves in sudden windfall situations due to the housing boom and skyrocketing stock prices, Harris said.
“This is different from previous wealth booms that primarily targeted the top 20% of households,” he says. “We see real, inflation-adjusted wealth growth across the entire income distribution, including at the bottom. We find that wage growth at the bottom is the most pronounced.”
While middle-class and wealthy people may feel guilty, “we can say that inequality is decreasing,” Harris said.
