We Feel Bad About the Economy. That’s the Problem.
The numbers say one thing. We feel something entirely different. And right now, that gap matters more than almost any economic statistic you could cite.
Consumer sentiment in April collapsed to 47.6, the lowest reading in the 74-year recorded history of the University of Michigan’s survey, falling below every prior trough including the 2008 financial crisis, the early 1980s recession, and the first months of the pandemic. Let that land for a second. We have never, in three quarters of a century of consistent measurement, felt this collectively grim about the economy.
And yet, if you just look at the standard stats, the economy is not in freefall. Unemployment is sitting at 4.3 percent. Inflation, while climbing, is running at 3.3 percent over the past year. GDP is still growing. So what is actually going on?
The honest answer is that how we experience the economy and how economists measure it have never been further apart, and both things can be true at the same time.
Rising gas, diesel, and airfare prices are already squeezing households, and economists note that negative sentiment is just one of the several ways the Iran conflict will work its way through the U.S. economy. Gas averaged $4.13 a gallon recently, up from under $3 in February. That is not an abstract data point. That is something we feel every single time we pull into a station. It is the kind of price change that rewires how we think about everything else we spend money on.
But here is what makes the current moment uniquely uncomfortable. Year-ahead inflation expectations just surged from 3.8 percent to 4.8 percent, the largest one-month increase in about a year, and long-run inflation expectations are now at their highest point since late 2025. When people expect prices to keep rising, they often behave in ways that make that prediction come true. They ask for higher wages. Businesses raise prices preemptively. The Federal Reserve finds itself stuck between two bad options.
Consumer spending accounts for about two-thirds of the U.S. economy, and if we pull back, it puts businesses under pressure, lowers profits, slows growth, and can eventually tip into recession. We are not there yet. But the warning lights are flashing.
There is also a political dimension to this story. The partisan gap in how we perceive the economy has become a canyon. Democrats’ sentiment is currently at 31.8 while Republicans are at 87.1 in the same Michigan survey. That is not two groups looking at the same economy and interpreting it differently. That is two groups living in essentially different emotional realities. When sentiment is that split, it becomes nearly impossible to have a shared conversation about what is actually happening and what should be done about it.
A March survey found 65 percent of us believe the economy will enter a recession in the next 12 months, up from 59 percent in February. Fear of a recession can be self-fulfilling in ways that an actual recession does not always have to be.
And now, with the blockade of the Strait of Hormuz taking effect after peace talks collapsed over the weekend, a global energy expert at Columbia warned that it could be a long time before oil prices come back down, noting that prices will not decline until the strait reopens and damaged oil facilities are repaired, calling those “huge variables which are really unsolved” through at least the end of 2026.
Former Biden economist Jared Bernstein put it simply this week: never tell people they are better off than they think they are. And whatever your politics, avoid doing things that make their lives more expensive.
We are already paying attention. The question is whether Washington is. Go beyond the headlines…
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