Matthews: Why the public thinks the country is in recession 

Reporters expressed some surprise at a recent Guardian-Harris poll revealing that 56 percent of those surveyed believe the country is in an economic recession, and that President Biden’s policies are to blame. And 49 percent believe the S&P 500 stock index is down for the year. Why doesn’t the public understand, reporters mused, that most of the macroeconomic numbers are really quite good? Biden, whose polling numbers are in the tank, has been wondering the same thing. 

But average Americans, those who are not economists or vote-seeking politicians, tend to focus on a different set of numbers. Let’s call them personal economic indicators, the ones individuals and families confront daily. And those numbers tell them a different story. What are they saying? 

Savings are gone. A new report from LPL Financial, based on San Francisco Federal Reserve Bank data, shows that families’ excess savings that accrued as a result of the government’s pandemic-related stimulus peaked at $2.1 trillion in August of 2021. But those savings have steadily declined and have now been exhausted.  

That money allowed families to keep up spending levels. “Throughout the more recent spending splurge, households drew down their savings by roughly $85 billion over the past year,” writes LLP. 

But with those savings gone, consumers face more difficulties in maintaining their lifestyles. Will they slow their spending, which could move the economy toward a recession? Probably not, at least not immediately, because of the next personal economic indicator. 

Credit card debt is way up. When there are no savings consumers turn to credit, especially credit cards. Time magazine writes, “According to the Federal Reserve Bank of New York, borrowers loaded an additional $50 billion onto their credit card balances in the last three months of 2023, an increase of nearly 5% that brings the total to a record high of $1.13 trillion.” (Emphasis added) 

So not only are savings gone, but credit card debt is at a record high. 

Living paycheck to paycheck. Here’s another negative for the Biden economy. Living paycheck to paycheck generally means “a financial scenario in which an individual or family’s income barely covers essential living expenses like housing, utilities, groceries and transportation.”  

According to a Forbes Advisor survey, “nearly 70% of respondents either identified as living paycheck to paycheck (40%) or — even more concerning — reported that their income doesn’t even cover their standard expenses (29%).”  

And one factor that has made living paycheck to paycheck an even greater challenge is inflation. 

Inflation lives. Biden and the media will sometimes talk as if inflation has gone down over the past year or so. For example, that Guardian news story claims “72% indicated they think inflation is increasing.” The reporter begs to differ, “In reality, the rate of inflation has fallen sharply from its post-Covid peak.”  

In fact, the public is correct. While the “rate of inflation” increases have fallen, inflation continues to grow, just at a slower pace. Those month-over-month inflationary increases are cumulative. That is, new inflation numbers are added on top of the old numbers.  

So, for example, the U.S. Department of Agriculture says that in 2021, Biden’s first year in office, “all food prices” increased by 3.9 percent. In 2022, by contrast, “food prices increased by 9.9 percent, faster than in any year since 1979.” Ouch! And they increased another 5.8 percent in 2023.  

That’s why shoppers aren’t wrong when they claim that some of the items they typically buy at the grocery store are 25 percent or even 50 percent higher than they used to be. Those yearly increases add up, forcing even more people to live paycheck to paycheck. 

Of course, many of the broader economic indicators have improved significantly. The country isn’t in recession, the stock market has recently hit record highs, and unemployment is still quite low by historical standards.  

The point that needs to be understood is that consumers see these personal economic indicators every day. They can turn off the news and tune out Biden’s economic self-backslapping. But they can’t ignore their own financial conditions. And these indicators are weighing heavily on voter confidence in the economy — and Biden’s presidency. 

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on X@MerrillMatthews.