Americans’ opinions about the state of the economy have diverged from reality
gloomy about the state of the economy. Since the covid-19 pandemic began, consumer sentiment has been in the doldrums, hitting its lowest level ever in June 2022. Such negativity has prompted claims that the country is suffering a “vibecession”—although the market appears healthy, good vibes are lacking.
Economists worry that current economic pessimism will become a self-fulfilling prophecy. Although a despondent public would have been a grave warning sign before the pandemic, since 2020 the mix of economic indicators that shape sentiment has changed, and as a result the measure has lost its predictive power.
Before the pandemic, the relationships between these indicators and consumer sentiment were relatively stable. When tested on data from 2017-19, the model trained on the 1980-2016 period reliably predicted sentiment, with only small errors. However, covid seems to have severed this link, making the model’s projections wildly inaccurate. If the pre-2020 associations still held, today’s score would be 98, some 30 points above the actual value.
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