Chances Are You're Wrong On Bidenomics: Survey Finds Wildly Concerning Views About Wealth, Income And Jobs

A large percentage of Americans appear to be wrong about the state of the economy.

While most people share a gloomy sentiment about unemployment, poverty, purchasing power and consumer spending, hard data shows that the U.S. economy is actually thriving.

A recent survey by FocalData and Financial Times sheds a worrying and bewildering light on perceptions of economic well-being versus real data markers.

More than 2200 U.S. adults were asked to rate their opinion on several economic indicators, and their answers were incorrect in most cases when compared to the numbers.

Are Wages Losing To Inflation?

Inflation has been a major concern for Americans — and most of the industrialized world — since the impact of the COVID-19 pandemic and the Russian invasion of Ukraine shot prices through the roof.

Although, with prices decelerating to a 3.2% rise in October versus the previous year, the worst part of the inflation storm seems to have passed.

Inflation has been consistently dropping since peaking in June 2022, and recent decisions on interest rates by the FOMC indicate that the Fed is getting comfortable with the rate of disinflation. The agency chose to pause interest rate hikes twice in a row in the most recent meetings.

This week, a report by ING even predicted that the Fed is ready to implement a series of rate cuts in 2024.

Yet of those surveyed, 73% of respondents believed that the rate of inflation had actually risen in the past year, while only 9% acknowledged that the rate of inflation was actually dropping.

While inflation is being tempered, the people surveyed continue to rate it among the most concerning issues impacting Americans today. When asked to compare prices and wages between today and one year ago, 90% of respondents incorrectly answered that prices have risen faster than wages.

Data from the U.S. Bureau of Labor Statistics, compiled by the St. Louis Fed, shows that median salaries have been rising consistently since mid-2022 while inflation has dropped.

Are Americans Worse Off Today Than Before COVID?

The survey also revealed skewed perceptions regarding net worth, living standards, and purchasing power.

Sixty-seven percent of those surveyed indicated they believe the median American household was wealthier before the pandemic, while 63% thought that the median income could afford a better lifestyle a year ago.

Yet Fed data from the Survey of Consumer Finances shows that American households have become consistently wealthier in the period spanning from 2019 to 2022, with the median net worth jumping from $144,000 to $192,000.

Net worth is up across the entire income ladder, as well as wages, that have risen for lower-income families since before the pandemic.

So, What's Going On?

Perceptions of economic well-being are relative and don't necessarily follow hard data markers.

Google Trends data reveals that the frequency of searches for “inflation” remained consistent in November, the same month the survey was conducted, as it was in January, a period when annual price increases were recorded at 6.4%.

Although the inflation rate halved, public interest in the topic remained high. This sustained attention is partly fueled by media reports that rely on search trends to determine their focus. This creates a feedback loop where certain topics are amplified and stay in the public consciousness, even when actual data suggests they are no longer a significant threat to the economy.

Political factors may also play a role in this phenomenon. As the presidential election approaches, candidates, particularly from the Republican side, are likely to craft narratives that resonate with their voter base, which can include emphasizing certain economic issues.

In recent debates, including the fourth Republican candidate debate this week, there has been a trend among Republican candidates to critique the current state of the economy.

In the second Republican debate from September, former candidate Mike Pence said that "Bidenomics has failed. Wages are not keeping up with inflation," which has been contrasted by actual data. The former vice president has since dropped out of the race.

Candidate Vivek Ramaswamy said in the third debate from November, that "prices are going up, but wages have remained flat," while South Carolina Senator and presidential candidate Tim Scott said that gas prices are "40% higher right now than they were just a little over two years ago."

According to data from the Energy Information Administration, retail gas prices nationwide have decreased since June 2022 and, as of November, are comparable to the rates seen two years earlier.

Yet, according to analyst John Burn-Murdoch, who authored the survey, poll respondents sometimes answer surveys with wrong information in an effort to adhere to the narrative of their party, rather than to reflect their own opinions, in a phenomenon referred to as "expressive responding."

Lastly, people's perceptions of the economy can take time to adapt. While it's true that the last year has been favorable in raw economic terms, the effects of decades-high inflation and interest rates on people's lives can leave emotional scars that don't disappear as quickly as data points turn around.

For investors looking for ways to capitalized on the shifting inflation outlook, here are five ETFs to consider:

iShares TIPS Bond ETF TIP: This ETF tracks the performance of U.S. Treasury Inflation-Protected Securities (TIPS), providing exposure to inflation-adjusted bonds.
SPDR Gold Trust GLD: While not directly linked to inflation, gold is often considered a hedge against inflation, and this ETF tracks the price of gold bullion.
Shares U.S. Treasury Bond ETF GOVT: This ETF invests in U.S. Treasury bonds of various maturities, which can be influenced by inflation expectations.
ProShares UltraShort 20+ Year Treasury TBT: This ETF seeks to provide twice the inverse daily performance of long-term U.S. Treasury bonds, making it potentially attractive during periods of rising inflation.
iShares U.S. Treasury Inflation-Protected Securities ETF STIP: Similar to TIP, this ETF offers exposure to TIPS, which are designed to protect against inflation.