This week brought another nugget of good economic news for the U.S. economy. Gross domestic product expanded at a healthy annual rate of 4.2% in the second quarter — a slight upward revision from the earlier reading by the Bureau of Economic Analysis.
Corporate non-residential investment shot up 8.4%, annualized, a big improvement over the previous quarter's 1.6%. Meanwhile, the unemployment rate has been falling and personal income rising, according to the Commerce Department.
So why are Americans so glum?
That's the question asked by investment and economic analyst Zachary Karabell in a recent piece at Slate.com. After running through these and other positive economic statistical trends, he observes that the Gallup poll's index of economic confidence remains mired in negative territory. (The most recent weekly reading was -18 on a scale of -100 to +100.) That's certainly better than the most recent weekly low of -42, reached early last October, and obviously a whole lot better than its nadir of -65 in October 2008, just after the fall of Lehman Bros.
Still, "far more people believe that the economy is getting worse than think that it is getting better," Karabell writes. "How can this disconnect between popular sentiment and much of the available data be explained?"
In his recent book, "The Leading Indicators," Karabell argues that we place too much faith in economic statistics that can't be more than rough, general approximations of the real world.
"People pay attention to their own experience, not just to the numbers," he told me last week. "They ask, 'Is my economy getting better or worse?' There's no one-size-fits-all in economic reality." The broad revival of economic activity is cold comfort to the worker still looking for a job or wondering whatever happened to the tradition of annual raises. "You can't argue someone into thinking that their quality of life is better than they think it is," Karabell says.
There's no question that the general improvement in the U.S. economy has left millions of Americans behind. Since 1973, worker productivity has increased by 2.5 times, but hourly compensation has barely budged. During the three decades before that, the two trends moved in tandem.
The stagnation of income for the middle and working classes has even set up a competitive battle among dollar stores, which serve the lowest end of the consumer market; sales of that one-time king of the working-class segment, Wal-Mart, have stalled along with its customers' disposable income.
The most vivid sign of economic health, the stock market, underscores the economic stratification. The Standard & Poor's 500 index this week topped 2,000 for the first time ever, but to a majority of Americans those gains don't register.
Wall Street promoters may brag about how even the average worker has a piece of the action through his or her pension funds, but that's deceptive. According to IRS figures, taxpayers reporting annual income of $250,000 or more receive an average of 24% of it from capital gains, a decent proxy for investment income. For taxpayers reporting income of $50,000 to $100,000, that figure is about 1.2%. For most people, income means wages, and those haven't moved much.
Still, the macroeconomic indicators wouldn't be rising if there weren't a fundamental improvement in the economy. So workers should be feeling better.
It's possible they're still shaking off a hangover. People's perceptions about economic conditions always tend to lag behind reality, especially if the events that left an impression were as cataclysmic as the 2008 crash and the Great Recession.
Even short recessions need time to shake themselves out of the culture. That was surely the case in late 1992, when Bill Clinton rode to victory in part because voters blamed his opponent, George H.W. Bush, for the lousy state of the economy. Except that the U.S. economy had bottomed out 19 months before Election Day and was already well on the way to its longest expansion since at least the 1850s. Clinton got credit for much of that.
Much of today's discontent may arise from memories of widespread prosperity in the 1950s and '60's, when a family could live a middle-class life on a single income.
Yet as Karabell observes, those memories are painted in the golden hues of nostalgia. "The life that income supported would be perceived today as insufficient," he says. He's right. We remember that homeownership expanded sharply in the postwar years with the opening of inexpensive suburban tract developments. We may not remember that the average Levittown home measured 750 square feet, comprising two bedrooms, a single bathroom and a combination kitchen/dining room.
American homes soon "bulked out" to accommodate appliances, televisions, belongings and larger families, as architecture critic Witold Rybczynski has written. Still, in the mid-1980s the median American new home was only about 1,600 square feet, or about 25% smaller than the median new home today.
It may be that what's bugging Americans isn't only economic conditions, but generalized discontent. The sources of this aren't easy to identify, though the trend line is: According to a recent Huffington Post compilation of opinion polls, the feeling that America is on the wrong track outpolls the "right direction" figure 65% to 25%. The best reading for "right direction" this summer is 33% (interestingly, from the libertarian Reason Magazine).
Or perhaps it's just that Americans by their nature never feel entirely content. Or that opinion polls by their nature are designed to elicit negativity — has "America is on the right track" ever polled well since the Era of Good Feelings after the War of 1812, or perhaps World War II after the Normandy landing?
The existence of 24-hour cable channels devoted to finding fault with the party in power or with the loyal opposition can't help. Nor can cable channels devoted to treating every change in the market indices, no matter how transitory and trivial, as a cataclysmic shift in investor mood.