Recent economic data reveals that the American economy is experiencing its most robust growth in two years, with a significant acceleration in gross domestic product (GDP) reported at an annualized rate of 4.3% this summer. This performance far exceeded the expectations of economists. However, despite these optimistic numbers, public sentiment about the economy remains largely negative, highlighting a disconnect between economic indicators and the everyday experiences of many Americans.
This paradox illustrates how a rapidly growing economy does not necessarily translate into job security or a decrease in living costs for all segments of the population. According to Mark Zandi, chief economist at Moody’s Analytics, the stark reality is that while GDP serves as an important economic metric, it does not resonate with the average consumer. Many are well aware that job security is precarious; if they were to lose their current employment, finding a new job may prove challenging. Furthermore, rising prices across a wide array of necessities—from coffee and beef to child care—serve as daily reminders of economic strain.
The recent uptick in GDP has been primarily driven by consumer spending. This pattern has persisted throughout both the Biden and Trump administrations, with resilient consumer activity observed despite various economic challenges. However, analysts suggest that the increase in spending has predominantly come from higher-income individuals, who are capitalizing on record real estate values and strong stock market performance. In contrast, lower- and middle-income Americans are grappling with financial pressures and thus are often forced to cut back on discretionary spending and fall behind on bills.
Mike Reid, a senior economist at RBC Capital Markets, noted that the economy is exhibiting a K-shaped recovery, where the wealthy continue to thrive while many others struggle. Although inflation has not spiraled out of control in recent months, it remains a critical concern. The annual inflation rate was recorded at 2.7% in November, down from an earlier rate of 3% when President Trump took office. Nevertheless, this figure significantly exceeds the 1.7% average inflation rate seen during the decade leading up to the pandemic.
While prices for some essentials have eased—examples include a 13% decrease in egg prices and a 1% drop in milk prices—others have surged alarmingly. Electricity costs are up by an average of 7%, and natural gas prices are 9% higher. The price of ground beef has surged by 15% year-over-year, marking its most substantial increase since 2020, while car repair and coffee have also seen price spikes of 10% and 19%, respectively.
Wage growth has been modest, particularly for middle-income and lower-income households, whose paychecks have not kept pace with rising costs. As reported by Bank of America, middle-income wage growth was a mere 2.3%, while lower-income households saw an increase of only 1.4%.
Consumer confidence reflects growing anxiety about job stability, with a recent report indicating that the number of consumers who believe job openings will increase in the next six months has reached its lowest level in four years. Concurrently, the unemployment rate has climbed to 4.6%, up from 4% earlier this year, and this shift has resulted in more job seekers competing for fewer available positions.
Experts attribute part of the slowdown in hiring to businesses adapting by employing fewer workers while leveraging technology, particularly artificial intelligence. In addition, the uncertainty surrounding trade policies has left many companies hesitant to expand their workforce, leading to staffing cuts as a means to cope with potential price increases associated with new tariffs.
In summary, despite what appears to be a booming GDP, the lack of substantive improvements in job security, purchasing power, and consumer confidence indicates that many Americans do not share in the benefits of this economic growth. Until there is a shift toward more equitable wage increases, greater job stability, and a clearer economic outlook, the prevailing sentiment is likely to remain skeptical.
