Vol 21 (2024) - Issue 2

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Perceptions of the US Economy Have Become Deeply Politicized: Does that Explain the Prevalence of Downbeat Views?

Synopsis
As the U.S. economy capped off a surprisingly strong year relative to low expectations, the business media, economists, and market commentators continue to puzzle over why so many Americans tell pollsters they have unfavourable views on the current state of the economy and give President Biden low marks for his handling of the economy even as it continues to outperform on many metrics. One possible explanation is political bias. Americans' perceptions of the economy have become increasingly influenced by their political party affiliation in recent years. This trend began under President Obama but has become more extreme under the Trump and Biden administrations. Simply put, more Americans view the economy as doing poorly when 'their guy' isn't in the White House irrespective of the macro-level data. This article will analyse nearly a decade of monthly polling data from the University of Michigan's Survey of Consumers and YouGov to quantify the impact of this political divide among respondents, compare it to mean differences in responses for other demographic subgroups (e.g., income, education, age) and evaluate whether demonstrated political bias sufficiently explains the prevalence of downbeat views on the economy. Spoiler alert: It doesn't.