{"id":9724,"date":"2024-02-13T20:05:48","date_gmt":"2024-02-13T20:05:48","guid":{"rendered":"https:\/\/topat10.com\/?p=9724"},"modified":"2024-02-13T20:05:48","modified_gmt":"2024-02-13T20:05:48","slug":"goldman-sachs-says-americans-are-judging-the-economy-more-harshly-than-usual-due-to-partisan-bias-and-an-over-15-perceived-inflation-peak","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=9724","title":{"rendered":"Goldman Sachs says Americans are judging the economy \u2018more harshly than usual\u2019 due to \u2018partisan bias\u2019 and an over 15% 'perceived inflation' peak"},"content":{"rendered":"


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Jan Hatzius, chief economist and head of the global investment research division at Goldman Sachs<\/a>, has spent the past few years playing Wall Street\u2019s optimist. While most of his peers warned that a recession was inevitable, or at least highly likely, Hatzius argued that the odds were more like 15%\u2014or at worst 35%<\/a>. He believed that inflation would fade as interest rates rose, without the need for a job-killing recession. So far, that outlook has looked prescient with the economy continuing its run of good form, and Hatzius has capped his last call by issuing a new one, saying in December we are in a \u201cGreat Disinflation<\/a>.\u201d<\/p>\n

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But that has left another call for Hatzius to make: explaining why consumers still aren\u2019t happy<\/a>. Compared to the pre-COVID era, U.S. consumer confidence has been in the dumps over the past few years. Even now, with stocks hitting new highs<\/a>; the unemployment rate near historic lows; and GDP growing at a steady pace, consumers don\u2019t believe in this economy\u2014or the government\u2019s economic policies.<\/p>\n

Some 72% of American adults say the economy is doing just fair or poor, according to a January poll<\/a> from Pew Research. And only 33% of Americans approve of President Joe Biden\u2019s job performance. But ask Goldman\u2019s Hatzius, and he\u2019ll say Americans are being too critical. \u201cAmericans appear to be judging the state of the economy and government economic policy more harshly than usual,\u201d Hatzius and his team wrote in a Fed. 5 note to clients.<\/p>\n

In the past, the Goldman team explained, economic indicators\u2014including the unemployment rate, income growth, GDP growth, inflation, and more\u2014have been able to \u201cexplain survey-based perceptions\u201d of the economy and government policy. But today, when Hatzius and his team compared the Conference Board\u2019s consumer confidence survey and the University of Michigan\u2019s survey on the effectiveness of government economic policy to classic economic indicators, they found that Americans just don\u2019t like this economy.<\/p>\n

\u201cSurvey respondents are judging the current state of the economy more harshly by 20pts or 10% and are judging the government\u2019s economic policy more harshly by 40pts or 35%,\u201d they\u00a0 explained.<\/p>\n

Even with consumer confidence measures climbing in recent months, Goldman noted that the large gap between consumers\u2019 sentiment about the economy and the actual economic indicators has remained \u201cmostly flat.\u201d Why are Americans so down on the economy? Goldman says there are two main reasons\u2014partisanship and the long-term impact of 15% \u201cperceived\u201d inflation.<\/p>\n

Political partisanship<\/h2>\n

The depth of political partisanship when it comes to Americans\u2019 economic views can be seen in Pew\u2019s latest survey of consumers. Just 13% of Republicans currently rate the economy as excellent or good, compared to 44% of Democrats, the poll<\/a> found. But when Trump was president before the pandemic, the dynamic flipped. A peak of 81% of Republicans said the economy was either excellent or good in early 2020, compared to just 39% of Democrats.<\/p>\n

This political partisanship is one of the main reasons why many Americans aren\u2019t enthusiastic about the economy, even though it has surprised experts and defied recession predictions, according to Goldman Sachs.<\/p>\n

Hatzius and his team found that Republicans tend to react more negatively to Democrat-led economies than Democrats do to Republican-led economies. And with Biden in office, that means Americans overall have a more negative outlook.<\/p>\n

\u201cConfidence tends to drop off sharply among supporters of both parties when control of the White House switches to the party they oppose, but the effect appears to be somewhat stronger among Republicans in recent elections,\u201d the Goldman team wrote, sharing a chart with their findings about U.S. post-election consumer sentiment drops.<\/p>\n