PEOPLE ARE UPSET WHEN STUFF COSTS MORE THAN IT DID A FEW YEARS AGO, ECONOMISTS LEARN TO THEIR AMAZEMENT

G. Elliott Morris has just published a post under the headline "The Mystery Variable That Explains Stubbornly Low Consumer Sentiment." Morris notes that consumer sentiment is remarkably negative right now.

The University of Michigan has been measuring consumer sentiment since 1952. On Thursday, economist Justin Wolfers flagged that the April reading came in at 47.6 — the lowest in the survey’s 74-year history. That index value is lower than for the depths of the 2008 financial crisis, the worst of the post-COVID inflation surge, the 2022-23 inflation spike, and any point during the stagflation of the early 1980s.

Why would that be? As in the last year or so of the Biden administration, many people think it must be vibes.

There’s a theory popular in certain corners of the very online left that consumer sentiment is inexplicably low right now because of the way the news media is covering the economy. The theory points out that in most of 2024 and 2025 the labor market was doing fine by historical standards, but people still rated the economy poorly. The sentiment numbers, per this view, are a product of news and social media amplifying bad economic stories and data and dragging down the national mood.

Morris sees a possible reason -- a "mystery variable" that economists apparently would never think of looking at when they're trying to figure out why normal people think the economy sucks.

... look at the following chart from the Michigan survey itself. It tracks the share of consumers who cite high prices as the reason they are personally struggling financially.

Before 2021, this number hovered near zero percent. Empirically speaking prices were a non-factor in how people viewed the state of the economy.

Then, everything changed. The share of adults citing high prices asa sources of anxiety went exponential during the 2021-22 inflation spike and never came back down. It’s now above 50%, likely because of the gas prices spike from the war in Iran.

This trend actually looks similar to a chart of cumulative change in food prices since 2014:

And the price of shelter:

... inflation dropping from 8% to 3% reflects a “cooling off” of the economy, but evidently people still mostly just see high prices for things and get upset about that. And fair enough!

I don't want to sound like a right-wing basher of experts, but what the hell is wrong with mainstream economists if it never occurs to them that people feel economic anxiety when prices go up and stay up, especially when they (justifiably) believe their incomes aren't keeping pace?

As an Axios story notes:

Since January 2021, consumer prices have climbed a cumulative 26%.

... Even as price pressures build, job prospects have started looking worse.

The rate at which companies have hired new workers fell in February to match the lowest levels of the pandemic, and the last time it was lower was in 2010....

Wages are no longer rising as they did earlier in the inflationary surge. Average hourly earnings were up 3.5% for the year ended in March, compared with 5.9% in 2022.

And ordinary people are upset? Who could have guessed!

I need to add one more factor that isn't taken into account in these posts: high credit card interest rates. Bankrate reports:

The average credit card interest rate is 19.58%, down from a record-high 20.79% set on Aug. 14, 2024.

But 19.58% is extremely high when average hourly earnings are rising 3.5% a year.

And what are the consequences of this? Here's what Bankrate said in January, before the Iran war jacked up the price of gasoline:

Sixty-one percent of Americans with card debt have been in debt for at least a year — up from 53% in late 2024.

... Forty-seven percent of credit cardholders report having a credit card balance. About 1 in 5 (22%) debtors don’t think they’ll ever pay it off.

... Among credit card debtors, 41% say their debt comes primarily from emergency/unexpected expense(s), including medical bills (12%), car repairs (8%), home repairs (8%) and other emergency or unexpected expenses (13%). Thirty-three percent, up from 28% in 2024 and 26% in 2023, cite day-to-day expenses such as groceries, childcare and utilities.

Americans are drowning in debt -- and then they go to the supermarket and the gas station and prices are still high or rising. And they're upset.

If this is baffling to mainstream economists -- if the usual data points they assess in order to understand consumer sentiment leave them baffled by the current low numbers -- then they need to assess different data points. It should be obvious now which data points they should be looking at.