Economists think people should be happy. They aren’t.
The above chart is easily explainable in two words. Before reading further, do you know what they are?
Americans Lose Faith
Please consider Americans Lose Faith That Hard Work Leads to Economic Gains, WSJ-NORC Poll Finds
America is becoming a nation of economic pessimists.
A new Wall Street Journal-NORC poll finds that the share of people who say they have a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. More than three-quarters said they lack confidence that life for the next generation will be better than their own, the poll found.
Nearly 70% of people said they believe the American dream—that if you work hard, you will get ahead—no longer holds true or never did, the highest level in nearly 15 years of surveys.
Economists have puzzled for several years over a disconnect between the nation’s widespread, sour economic outlook and traditional measures that show the economy to be robust. That problem bedeviled former President Joe Biden and contributed to his party’s loss in the 2024 election.
Now Trump is contending with a similar disconnect after being powered into office by Americans who thought that his economic policies would improve their finances.
Trump has said “we have the hottest economy on Earth,” and inflation and unemployment aren’t high by historic standards. But only 17% in the survey said the U.S. economy stands above all others in the world. Nearly 40% said other nations have better economies—a 15-point rise from 2021. America, in some ways, has lost its sense of exceptionalism.
When Mahoney, the Stanford economist, and colleagues Ryan Cummings and Benjamin Harris looked at how economic metrics compared with economic sentiment, they found that the two moved largely in tandem from 2005 until the pandemic. Then, the two diverged, with sentiment turning more negative than predicted by traditional measures of the economy.
“The gap is staggering,” Mahoney said of the separation of sentiment from the solid economic metrics. One factor fueling the gap recently, he said, has been the stock market boom—“which has historically translated into stronger sentiment. But not on this occasion.”
The economy’s ‘triple whammy’
Karlyn Bowman, senior fellow at the right-leaning American Enterprise Institute, said the sour public mood probably reflects that Americans have been buffeted by various economic forces for years, among them the financial crisis of 2008-09 and the Covid pandemic. Now they face inflation, labor-market concerns and tariffs—“a triple whammy,” she said.
Disconnect? What Disconnect?
Economists see a disconnect because none of them understand the real word or inflation.
Food prices are inadequately measured in the CPI and shelter is much worse.
Few can afford a home and prices have gone out of sight.
Economists do not count home prices in the CPI. They do not count property taxes in the CPI. And they do not even properly count homeowner’s insurance in the CPI, just replacement costs of contents of a home.
WSJ Poll – Concerns
Here’s the WSJ Poll. The link is public.
Interest rates are largely housing related. Food speaks for itself.
So if your two answers were food and shelter, you got my lead question correct.
Confidence in the US Economy
Looking Ahead
Housing Mess Entirely of Fed’s Making
The housing mess is entirely of the Fed’s making. And it’s what happens when the Fed, and economists in general do not count home prices as inflation.
Home prices are not directly in the CPI or PCE. The latter is the Fed’s preferred measure of inflation.
Economists consider home prices a capital expense not a consumer expense. The problem is simple: Inflation is not just a consumer price concern!
The Fed ignored obvious inflation in the Great Recession and did so again in the Covid recession.
The Fed does not know what to do now because there is no good answer.
For homes to become affordable again. mortgage rates need to decline and home prices need to fall dramatically.
Trump Does Not Understand Interest Rates
For discussion of what the Fed controls or doesn’t please see Chart of U.S. Treasury Yields Show Trump Does Not Understand Interest Rates
Trump wants the Fed to control more than it can.
Any guesses as to how much free money Trump will seek to give away to promote “affordable housing”?
Related Posts
August 11, 2025: Over Half the US Has Major Stress Over the Price of Food
Are you stressed out over food?
August 12, 2025: Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
August 23, 2025: It’s Now Twice as Expensive to Buy an Entry-Level Home than Rent
Thinking of buying a starter home? Be careful!
Is Homeowners Insurance Understated in the CPI? Shop Around!
On August 11, I asked Is Homeowners Insurance Understated in the CPI? Shop Around!
If you own a home, what percent of your income is spent on your homeowners’ insurance?
Under 1/2 of 1 percent? [That’s what the BLS says. And it does not count property taxes at all.]
To food and shelters concerns, please add jobs. Things are going to get much worse.
@Mish, I think the more interesting question is what happened since covid that broke the relationship between predicted and actual sentiment?
And now we have idiotic tariffs.
The chart only goes back to 2006
QE money printing and MBS loans on the one hand and a 6 year plan of serial annual % deficit to GDP spending which produced only puny US GDP % gains. At least the American consumer transiently benefited by cheaper prices associated with 40 years of globalization and America’s 75 year beacon as the preeminent rule of law nation and the strongest alliance nuclear superpower. All four wheels are simultaneously falling off the bus. This is the famous pretzel hold. The global asset-debt macroeconomy is the near edge of the first of two nonlinear asset price devaluation precipices.
Not sure I get your analysis here, Mish.
QE and 0 interest rates started in 2008, 11+ years before COVID and before the separation of predicted vs. actual consumer sentiment in your first graph above.
So for a decade after the basically unprecedented QE and 0 interest rates (which the Fed coordinated), consumer sentiment followed its previous predicted pattern.
Are you saying it took a decade for people to wake up to the repercussions of the Fed’s actions, and for economists to be oblivious?
Or is a better explanation that COVID (and society’s subsequent actions) rocked the proverbial world of survey takers – including those worried most about healthcare (which is difficult to directly link to Fed actions)
I agree – based on the graph it is much more likely that something around COVID and the way it was dealt with broke the correlation. Or the economic fallout of it.
Because all of our resources are being co-opted by health care spending. It is 16.8% of US GDP. No other country comes close to that. That’s an opportunity cost against every other industry we have. This is a command economy, and the medical industry is the winner.
Food, shelter, and all consumer price inflation are a direct effect of the K shaped recovery. Make some people immeasurably wealthy “overnight”, and clearly they are going to spend it like lotto winners, pushing prices up for everyone, including the 60% of society who got no “free money”. What makes it worse is the gougers, most of which are mom-and-pop landlords who lowered their mortgage payment on properties they already owned, then turned around and cranked up rents 40% or more. The greed is just astonishing.
This is incorrect: “For homes to become affordable again. mortgage rates need to decline and home prices need to fall dramatically.”
Mortgage rates do NOT “need to decline” for houses to become affordable. Mortgage rates merely affect how far prices need to fall before affordability is restored.
If rates stay high, prices will fall further.
Since mortgage interest rates are not in anyone’s control (though some pretend otherwise), relying on them to fall is unwise.
I was discussing likely scenarios.
It could be either.
If home prices stayed the same and mortgage rates dropped to zero (not going to happen) homes would likely be “affordable”
If home prices fell by 60 percent mortgage rates would not have to drop.
Realistically, some combination is needed.
Government is corrupt and incompetent. It should be as small as possible.
They gave a couple trillion dollars to rich people during the GFC through PPP, ERC, EIDL and other programs. Have allowed houses to be sold with 0% to 3.5% down with payments that are up to 50% of family income. This aided home inflation and those loans will default. The constant huge deficits now steer the economy. They are inflationary, which makes life for the bottom 80% difficult.
Nothing gets fixed until lobbying is illegal. Big companies and Wall Street buy legislation and policy that benefits them and makes everyone else poorer.
I’m not sure why anyone would be happy with King Chaos and his Court Jesters…
1) attacking the world with tarrifs, having US consumers pay for it, saying they won’t
2) attacking the consititution, while branches #2 & #3 do nothing
but it doesn’t bring the MAGA crowd down…
they live in an imaginary world of their own making.
But the other choice had a wobbly voice and her running mate may or may not have put tampons in male toilets. What were they to do?
Let’s call a spade a spade here… these people never recovered from their Obama trauma. A (half) black man as president broke their little brains. A half black woman was completely out of the question, and the DNC should have known it.
Black, but African American? I”ll get to that in a minute.
Trump is a Symptom of the decay in America. Not the cause .
You liberals won’t dare look in the mirror or read a newspaper to find out the destruction you clowns escalated the last 4 years.
You are making a racist comment but since you are a liberal you think you’re entitled to do that.
Sure there are people in this country that will not vote for a black man & woman.
DNC? LOL.You liberals proved that you think America will not vote for a Jewish man or women by what the DNC under Hillary did to Bernie Sanders. Know one is above the law blah blah blahblah blah.
I voted for Obama the first time. Had a tear in my eye watching some of the video from the capital. I can’t stand him once I figured out what and who he really is. Which some people smarter than me figured out before I did. And it was not because they are racist. Yes there are some racist asshole white people in America, the population of these idiots is far less than you think. I know a lot of racist asshole non white peoples too.
Black? Black is a color. Good or bad I do not consider him Americas definition of African American culture.
Obama has next to NOTHING in common with African Americans. Not the ones I grew up with. Nothing. All the african americans I know & went to school with didnt grow up in Indonesia and then Hawaii at a private high school. He never grew up from birth thru college with our definition of american black kids until he went to chicago.
Kamala? Only a moron would vote for her. Unless you believe other people behind the scenes are actually running the country. You know kind of like the previous 4 years. You push Kamala Harris on the American people after lying to us for 4 years about so many things
and then want to complain about Trump?
Kamala,1/2 Jamaican 1/2 Indian. Same. In the real world I’ll let you call a person of Indian heritage black. Be ready for a brawl. Jamaicans like to be called Jamaicans because they don’t like being called black because most of the them do not like African Americans. I hung around 2 U.S. Jamaican born servicemen for 20 years. Their words not mine.
My son is blacker than these 2 from his moms side
The next time we elect a black man or even a woman for president is it too much to ask that they actually be a black american?
Bingo…….Why is that constantly over looked? Perhaps if some of you liberal Democrats would look in the mirror and clean up your side of the isle then maybe Trump wouldn’t be our President??
The Border was a white-right wing conspiracy theory until 14 million people from 100 countries were floating around the country and getting free housing food clothing & cell phones from states that are now basically bankrupt. And you lied about it for 4 years.
Crime is down in our major cities? If you believe that you will believe anything.
Some of you liberals think attacking the constitution is bringing in the national guard into DC to only just stop crime. The African American mayor actually publicly thanked Trump. Hopefully for her its her last year because she will now be destroyed by her own party for going against their bullshit and lies and group think talking points.
Worse I have to see pictures of white liberals coming in from their million dollar homes virtue signalling about how that is a violation of the constitution, I’ll let the attorneys decide that, not you. But I will listen to all the black folks that actually live there that are greatful it happened.
PS:DC has 15 District judges i think is the total. 5 not born in America, 3 with dual citizenship and , not you , but for the numbskill here complaining about the “jews” none of those 3 are Jewish or Israeli.
PS2: Your new democrat talking point is Trump is going to go into all our cities because he is then going to commit election fraud. Heard that one yesterday.
Come on get up to speed with your cult.
More Democrat-bashing hubris LOL
This simplistic ‘other choice’ nonsense is such BS just because you don’t want to hold Trump responsible for his own actions (not even the Republican Congress’ actions).
Why didn’t the Republican party put up a different candidate? Republican voters could have voted in Haley, DeSantis, Christie, Ramaswamy, etc. before they even faced the Democratic candidate.
If they had, do you honestly think we’d be in the same place as now with Trump’s actions? If so, I think you’re disingenuous.
Did Trump ‘cheat’ by not participating in Republican debates? Or did a lot of Republicans get what they actually voted for (not because of Democrat choices later), but are now not so excited with their own voting consequences?
Democrats did not run a candidate. Biden was the default candidate as the incumbent president. Once he stepped down there *should* have been an open candidacy for the Democrat leadership. Instead, Kamala was *installed* as the candidate along with Tampon Tim.
Even in 2020 Biden didn’t win the candidacy. He too was *installed* once it became clear Bernie was going to win and face Trump and the Democratic leadership felt he couldn’t beat Trump. So Bernie’s supporters changed to Biden in exchange for Woke nonsense that torpedoed his entire presidency.
So technically there has been no actual choice since Hillary in 2016 which means the next time there might be a choice will be 2028!
On the Republican side, Trump won 3 straight times.
Nice opinions, especially the one where you know exactly how and why “Bernie’s supporters” (which are millions of regular voters) “changed to Biden in exchange for…”
Giving non-referenced statements as fact is why the term ‘hubris’ was created.
But what does that have to do with the point of this specific blog chain that people like David (and you?) won’t just say you voted for Trump because he’s giving you exactly what you wanted? Why blame his actions on the Democrats and their candidates?
Why can’t you just live with your vote and its repercussions? PTSD?
This site doesn’t allow lots of links in the comments so you can’t link a bunch of references.
As for Bernie’s supporters, it’s not the millions who voted for him who stopped the support. It was all the super Democratic votes who count more who switched to Biden. Bernie and his lot was persuaded to drop out in exchange for getting lots of Woke policies passed by Biden.
If you’ve read my comments before you’d know I’ve posted MANY times that I’m a Canadian living and working in the US for a few decades. So I don’t get a vote.
As far as Trump goes, I hate his tariff policy but I absolutely am on board with everything he’s done on the immigration front, everything he’s done to end DEI/Wokeism etc. If he’d just never bothered with tariffs he’d have massive approval ratings.
Bernie got nothing except humiliation and shame for dropping out: and no less than he deserves. Biden practically giggled at dumping on Bernie’s followers, trashing his ideology while pursuing equally loser policies.
The fact is Kamala would have been a vastly better President.
Let’s not forget about declaring war on Chicago.
Just when you think it can’t get any stupider…
42 story, 1 California Plaza, in downtown L.A., is now in receivership. Santa Monica is on the verge of declaring a fiscal emergency.
https://ktla.com/news/local-news/santa-monica-officials-considering-fiscal-emergency-declaration/
Is California still part of the United States?
Sure Trump, Republicans and every president for the last 17 or more years deserves there share of the blame too.
Don’t worry things are going to get better because the governor of that state will be running for POTUS.
What his track record, what could go wrong?
The solution is obvious.
Consumers suffer from ignorance and need to be educated — exposed to more economic metrics and expert opinions, through free mandatory courses at work and through the MSM; a whole-of-society effort.
Then they will see the light.
Just as in IT security: “Educate the user”
As fool-proof a plan as I have ever seen.
A wise man once said: You can’t fix stupid.
In the WSJ poll you posted, healthcare and prescription drug costs were a bigger concern than housing and interest rates.
What does that have to do with your thesis of “shelter and food” and the Fed’s action since COVID?
Or maybe it’s just the once-in-a-lifetime effect of COVID and not the measurement of housing prices?
As a contrast to skyrocketing electricity rates in Oceania, check out how those “commies” are doing:
https://yandex.com/video/search?text=inside%20china%20business%20electricity&from=tabbar
Beautiful cities in America include run-down UGLY-AS-HELL flat-roofed STRIP MALL SPACES – – a product of the ZERO CAPABLE ARCHITECTS of the 60’s on up. America is SO FREAKING UGLY – – I would rather look at an Historic RUIN in LISBOA versus what we have here across America.
Speak for yourself, it’s pretty nice where I am (New England)
I’ve visited some of the nicer spots in Europe and it’s just as scenic where I live now.
We have good local governance, excellent schools, low crime, and a high standard of living, all rivaling the wealthiest areas of Europe.
It’s not cheap but neither are the nicer parts of Europe. It’s also not as expensive as a lot of parts of the US that seem to have worse living conditions.
With this needs to come a major reckoning for the “study” of economics. It was a joke major when I was in school but now it’s proven to be complete basket weaving given how “experts” are somehow able to find a rosy outlook on everything. Right up until they label it a recession ten years after the fact, that is.
This blog is the absolute only piece of economic media that interprets the data into the at times comically obvious conclusions. Everyone else is very excited over the hopes of getting a big fat rate cut. Yeah guys, that’ll bring the 17,000 jobs Korea is looking to pull out of Georgia! These pencil necked geeks can only read charts so they’re essentially worthless at seeing any real world economic trend. An argument for ending the fed if there ever was one.
Thanks for your opinion, but…
The market disagrees with you: https://www.cnbc.com/2025/04/16/highest-paying-college-majors.html
Economics majors are only below engineering degrees, in terms of what businesses will pay those graduates to work for them. You might think all those business owners are idiots for doing so, but then you’d be full of hubris.
LOL. The good news is South Korea is our ally and we “friendshore with them”
Is it safe to say those hundreds of imported South Koreans that supposedly are getting deported were counted as job gains for the Untied States worker when they got hired?
And I guess that’s now going to be considered more job losses for Americans?
@Mish, I think the more interesting question is what happened since covid that broke the reationship between predicted and actual sentiment? The challenges in poor KPIs you mention existed before 2020 right? So what do you think changed?
Partisan bias accounts for at least some of it. Going back pre-GFC, it wasn’t as strong. Depending on the party in power today, no matter what happens to the economy , about half the population things it’s better (or worse) than it actually is. The conservative side of the equation tends to have the stronger error bias, but it’s omnipresent.
Side comment: It’s not accurate to say that housing is not included in inflation. It’s there, but indirectly. Primary rent is obviously there, but home prices impact insurance rates and other services, so that portion is included. Home prices also impact owners equivalent rent (imperfectly), so that’s present as well.
To a degree, incorporating housing prices directly risks double counting. Mish likes to oversimplify the question a bit.
Americans Lose Faith:
– America is becoming a nation of economic pessimists. > I feel as though they are being led there, but the MSM. “Doom and Gloom Loop” 24/7 on most MSM Channels, when I turn it on, and back off not long afterwards. It’s nauseating!
– A new WSJ -NORC poll finds that the share of people who say they have a good chance of improving their standard of living fell to 25%. > How can anyone that needs or desires to improve their standard of living, when you simply look at basic cost in order to do so, possibly have a better outlook? Cost for everything has exploded, and not gone back even close to what they were. Even then people struggled but saw light at the end of the tunnel around them. Now everyone is in the dark, and backpedaling.
– More than three-quarters said they lack confidence that life for the next generation will be better than their own. > Perhaps if they focused on their own, up to the minute life, and style of such, instead of worrying about the Generation After Them! If they do a good job now, it will assist in that occurring perhaps.
– Nearly 70% of people said they believe the American dream that if you work hard, you will get ahead no longer holds true or never did, the highest level in nearly 15 years of surveys. > Did they ever try? Working hard does Not equate to money earned, or a laborious job is required to do so. It means “Live Smart” Things like wear a sweater, not turn up the heat, Eat at home normally, and maybe once every 3-4 months you go somewhere for a nice lunch as a treat to yourselves, maybe get rid of cable, and stream 4 or 5 channels, and reduce that bill by a lot, when you run an errand, make it 3 or 4 to save on gas, and wear and tear on your vehicle, ETC.
– Economists have puzzled for several years over a disconnect between the nation’s widespread, sour economic outlook and traditional measures that show the economy to be robust. > Maybe if the Media stopped showing everything and everyone to be so glamorous, it might help. That’s not reality, but rather richness. The average person will never see that sort of money. Show above average, which is attainable, and maybe more would push harder, as they see it as achievable.
>> I sense the MSM is behind a lot of this deviation. They drum beat bad news, and rarely even show good news. The Republicans can do nothing right, even if and or when they do. The Dems can’t do anything wrong, and do everything right. They are both wrong on so many levels, but when you try and manipulate data like so, it rarely works for long, as the truth ends up showing up. By the Mid-Terms, this will all change IMO. They will have pushed the misery to the brink, but things will have started to look better and then the Credibility is lost for a long time IMO…
“Mr Fed Chairman, can you review the ways in which not counting housing in measuring inflation has done good things for the USA?”
This is exactly why a communist is the leading candidate for the mayor of NYC. The middle class is being lied to by the economic politburo. As people finally see their standard of living slipping away it will lead to social, civil and political unrest. All part of the fourth turning. The rich are getting richer and the poor getting poorer. This is exactly what happens in countries where communism takes hold. Sounds good in theory but we all know how horrible it really is.
By communism you mean the guy in the oval office acting like Hugo Chavez?
I agree. The Federal Reserve takes most of the blame for economic inequality now though right?
And it is even worse than you describe.
Maybe politicians were never who they said they were ever in our history but now local politicians are just a face, a puppet of either some NGO, Soros, or some millionare that bank rolled AOC. They can even be a foreign government for all we know. They don’t even try to hide it anymore.
You know, AOC that girl from the Bronx that spent most of her years in Westchester County NY, Yorktown, very nice area and graduated from Yorktown High School.
I can only imagine where she really lives now but hey she is still AOC from the Bronx
Besides the fed being to blame we are under a corrupt crony capitalist system both giving us the same results. We don’t have free market capitalism the most successful economic system in the world. We also have the best govt money can buy. Unless you allow the parasites only one longer term and have the govt finance each campaign with an equal amount of funding nothing will ever change. Maybe at the end of the fourth turning these things will happen.
One word: Inflation.
Recall Japan went like 3 decades without it and were the happiest of happys.
Uncertainy in everything and its price is bad.
Unidirectional constant onslaught of higher prices is destructive and terrifying.
Now add the seasoning of intentionally choosing to NOT count a large segment of what people use in this so-called CPI basket is the galling part. This insulting of our intelligence — yet we demand no change oddly enough — and the nerve of TPTB is what makes our blood boil.
Food and shelter are a rock-solid 2 words but had there been no inflation in them to not count they would not be the answers. Massive inflation, intentionally underreported, is the answer.
If you want interest rates to come down, you need to reduce inflation. And honestly, interest rates are not all that high. As is usual for Americans, they only recall the very recent past and have forgotten the 80s and 90s when all rates were higher (including tax rates) and at the same time economic growth was stronger.
I remember the 1970s when the 10-year hit 15% so when inflation goes from 2.3% to 2.8% I don’t see the sky falling. I financed a house when the mortgage rates were 9.5% and I survived.
My first home in the 80’s carried a 12% interest rate. We THEN decided that we would NEVER carry another Mortgage for long. In another 12 years, we moved to the Mountains, in cheaper-housing territory, and paid cash.
White House promises better economy by year’s end
https://jamiedupree.substack.com/p/white-house-promises-better-economy
Day One for every solution has turned into Constantly Moving the Goal Posts for everything. Also, the goal itself gets adjusted. Not the first time in history, but this is the most egregious gap I can recall across the board.
I think Mish hit on something with an upcoming initiative from Trump for “affordable housing” that will be a big subsidy for realty pals, a vast budget buster, and the next massive attention swerve.
Politician promises to do something. Born Yesterday bait
Yep, voting is a naive fool’s errand.
Free ponies for everyone!
Property Taxes, Insurance, and repairs are making it harder to hang onto what you already bought. My nice moderately priced subdivision in a nice community had an influx of buyers who are now trapped. The houses are deteriorating with junk cars parked on grass.
Throw in food and utilities and it’s no hard to figure out. Also lost is that most owners under 45 can’t do many repairs. My 95 your old neighbor gets on his roof and just added railings to his porch for his wife.
Work is another issue as young people are promoted without adequate experience. Issues between younger and seasoned workers are much more of a problem than talked about and more severe than it used to be.
Yes, I think younger generations tend to “observe” rather than “fix”.
We boomers had to learn how to fix, because we had the WWII generation breathing down our collars.
If that’s the case, why has everything been broken since the 70s?
Are you in Florida? Las Vegas? Phoenix?