By Abha Bhattarai and Jeff Stein
Published January 19, 2024 at 12:32 p.m. EST
It appears Americans are finally feeling better about the economy.
Consumer sentiment, a window into the nation’s financial mood, jumped 13 percent in January to its highest level since mid-2021, reflecting optimism that inflation is easing and incomes are rising, according to a closely-watched survey by the University of Michigan. Since November, consumer sentiment has risen 29 percent, marking the largest two-month increase in more than 30 years.
Gas prices, often a key driver of sentiment, have fallen 40 percent since June 2022, to just over $3 a gallon. Weekly jobless claims are at their lowest level in over a year. And sales of cars, clothing and sporting goods all picked up during the holidays, as consumers felt confident enough to keep spending.
“We’re seeing a continuation of the surge in sentiment we saw at the end of last year,” said Joanne W. Hsu, an economist at the University of Michigan and director of its consumer surveys. “If anyone was wondering, 'Was December a fluke? It is absolutely clear now that it wasn’t. This is a sign that consumers are feeling better. Their confidence has come back.”
That jump is fueling hope that the U.S. economy — and Americans’ perception of it — may be turning a corner after months of inflation-related unease. Rising sentiment among both Democrats and Republicans comes at a critical moment for the Biden administration, which has struggled to convince voters that its economic policies are making their lives better ahead of November’s presidential election.
“At a cerebral level, voters may still say Biden mismanaged the economy,” said Tobin Marcus, head of U.S. policy and politics at Wolfe Research, and an economic policy staffer to Biden during the Obama administration. “But the dissipation of their really intense personal dissatisfaction with the economy still really helps at the level of the political context.”
Democrats are cautiously optimistic that improving views of the economy will boost President Biden’s chances in the 2024 presidential election, after months in which inflation and voter fury over the economy appeared to be an intractable political problem.
The White House has so far reacted cautiously to surveys showing improvement, not sure if they reflect a durable shift or statistical noise. But that is starting to change. On Friday, the administration pointed to improving sentiment as a sign that its policies are “delivering results that more Americans are feeling.”
“President Biden is making progress lowering inflation while maintaining a strong job market,” Jared Bernstein, chair of the Council of Economic Advisers, said in a statement. “We have more work to do, but we’re on the right path.”
By many measures, the economy is on solid ground. Workers have jobs, wages are growing faster than inflation and families have continued to spend heartily. But fast-rising prices have soured many Americans’ outlook, leading to a disconnect between what the economy looks like on paper and how families are experiencing it.
So far, the uptick in economic sentiment has not revived Biden’s flagging poll numbers or voter perceptions of his economic management. Those perceptions could be crucial in a reelection matchup with Donald Trump, who continues to receive strong marks from voters for his handling of the economy. But Biden could narrow the gap if the positive outlook persists, not just for a few months but over the rest of this year, analysts say.
“There is still a debate on the internet about whether consumer sentiment is actually good, and we should listen to families who say they’re struggling," said Elizabeth Pancotti, strategic adviser at the Groundwork Collaborative, a left-leaning think tank. “But I think it’s clearly getting better and we’re on a pretty good path for November.”
The changing economic circumstances could complicate the GOP’s general election message, but for now conservatives remain confident Biden is vulnerable on inflation and economic angst.
“The economy has clearly gotten better over the last year … No doubt about that,” said Stephen Moore, the founder of the Committee to Unleash Prosperity, a conservative group, and an outside economic adviser to Trump.
Still, Moore and other economists, caution against thinking this is a done deal. Although consumer sentiment has improved dramatically in the last couple of months, it remains about 7 percent lower than the historic average, Hsu said.
“Consumers are feeling much better than they were a few months ago, but that still doesn’t mean they’re feeling great or super optimistic,” she said. “This isn’t a roaring 2024 — at least not yet.”
Still, there are signs that more Americans feel the worst is behind them. Jake Ficek, an electric lineman near Bloomington, Ill., says he’s feeling better about his finances than he was a few months ago. He’s making more than ever — nearly $57 an hour — and has found new ways to deal with inflation.
He’s started buying entire cows, pigs and chickens from a local butcher to save money on meat, and tills a nearby vegetable garden in exchange for free tomatoes, lettuce and herbs. As a result, Ficek says, his overall quality of life has improved: He bought a new boat in December and spent the holidays in Mexico with his girlfriend.
“A lot of the time, it feels like the economy is different in the real world than what they’re telling you,” Ficek, 27, said. “But I feel like that’s changing."
