I don’t know about you, but the steady trickle of financial news chiding average Americans about their economic perceptions is starting to bug me…

Here’s just one example from The Washington Post:

Nearly everything Americans believe about the economy is wrong, according to a recent Harris-Guardian poll. And that’s pretty much everyone’s fault.

The poll, conducted earlier this month, found that perceptions of the U.S. economy are often at odds with reality. For instance, most Americans (55 percent) think the economy is shrinking, with about the same share saying we’re in a recession.

“Don’t believe your lying eyes,” so many financial writers across so many financial platforms seem to be saying. “The economy is booming!”

They point to the S&P 500 being up over 20% for the year… unemployment being at a multi-decade low… and GDP growing 3.4% last year with a further 1.6% boost in the first quarter of 2024.

Plus, wage growth, they say, is rising faster than consumer prices. (More about that shortly.) In which case, it is no wonder consumers have been so “resilient.” Right?

They’re making bank, baby!

Yet the “little people” fail to appreciate these facts and figures, the silly creatures that they are. That’s why WaPo and so many other outlets were quick to reference a Guardian-commissioned Harris poll showing how 49% of Americans believe the stock market is down.

The same percentage says unemployment is at a 50-year high. While 55% think the economy is shrinking. And 56% argue the country is in a recession.

“How can so many of us be that deaf, blind, and mentally dumb?” these writers seem to ask. Fortunately for us, they have the answer.

It ranges from “political bias” to “poor media messaging” to “people projecting based on higher grocery prices, which makes them think they’re doing worse off than before.”

One way or the other, though, the general conclusion is that consumers are simply wrong. Often downright silly.

Sometimes, flat-out stupid.

Either way, it’s not the economy’s fault. It’s yours!

But such thinking mistakes the model for the thing it measures. And it deserves scrutiny.

The Cost of Life and Living Are Elevated to the Extreme

A big sticking point for consumers is grocery prices. They’re up – a lot – ever since the shutdowns (and several other factors) threw our economy into chaos. A common staple like eggs, for instance, aren’t as expensive as they were last year, but they still cost 26% more than they did pre-pandemic.

Now, newscasters will tell you that, according to the Economic Policy Institute in March, non-inflation-adjusted wages rose 34% in that same timeframe.

As if that mattered…

Adjust for inflation, and real hourly earnings are down 2% over the past three years. Most people are treading water or falling behind.

Housing is another pain point. After all, you have to live somewhere.

The consumer price index – the government’s official record of consumer inflation – tells us that the cost of “shelter” is up some 19.5% in three years. If only that were true…

The National Association of Realtors tells us that the “qualifying income” for a home purchase in 2021 was $57,888. Thanks to rising mortgages and a housing boom, that same figure is $100,464 as of March. That’s a bit of a problem when the real median income in the U.S. is some $74,000.

The situation with renters isn’t much better.

Zillow acknowledged last month that renters need to make 31.5% more than in pre-Covid years to afford the average rent. That’s why Harvard’s Joint Center for Housing Studies found in February that “half of all renters [are] paying more than 30 percent of their income on rent and utilities.”

But no big deal, right? Nothing to see here.

Just like there’s nothing to see in car insurance hitting a 47-year high in December – with further increases since. Or home repairs rising 40% above pre-pandemic levels.

GDP may look healthy, but there’s also:

• Auto loan delinquencies reached a 28-year high in November and remain elevated today (despite a month or two of positive progress, probably helped by tax refunds).

• Mortgage delinquencies are up 0.2% year-over-year in March to 2.8% nationwide.

• Evictions and eviction filings are rising across the country, from D.C. to Dallas to San Francisco. Even my home state of South Carolina was called “an eviction hotspot” by The Post and Courier last month.

• Credit card delinquencies were at their highest level in Q4-23 since 2012, according to recent Fed Philly findings.

Brushing aside those facts is myopic at best. It’s clear consumers have multiple very valid reasons for feeling uneasy about an economy that has serious cracks forming.

If I’m Seeing Reason To Cut Back; I Know Others Are Too

I don’t know about you, but I’m a fairly frugal man. I have been ever since I lost everything in the housing crash of 2008.

I can easily break up my life into two eras: pre-2008 when I was a jet setter with flashy clothes, flashy cars, and a flashy family… and post-2008 when I came to understand the true value of a bargain.

Post-2008 me shops at Target for my basics. I don’t treat myself and my loved ones to lavish annual vacations. And despite the successful career I’ve built since losing my last one, I really do try to watch my overall expenses.

Admittedly, I could cut back on my Starbucks addiction. And I do have a Porsche vice, with two of their vehicles currently sitting in my garage.

I’m also fortunate in that I live in a fairly low-cost area. Prices have gone up here in northwestern South Carolina, mind you. But they’re nowhere near as bad as they are elsewhere in the U.S. and larger world.

Even so, I’m turning part of my house into a home office after canceling my lease on rented space. The monthly cost just kept jumping, and it jumped too high this year.

I couldn’t justify the expense anymore.

If I’m saying that with my successful business and effective investing strategies… you’d better believe there are good reasons behind other people’s “perception” of the economy.

No matter what the financial press says.

Regards,

Brad Thomas
Editor, Intelligent Income Daily