While economic indicators suggest the U.S. economy remains on solid footing, many Americans express unusually high levels of pessimism about their financial futures—a sentiment not fully explained by official statistics, experts say. Global trade tensions, particularly new tariffs, contribute some uncertainty, but core metrics remain stable. Inflation, excluding volatile food and energy components, stood at 3.1 percent in August, according to federal data. The unemployment rate was 4.3 percent that same month—higher than the 3.4 percent low reached in April 2023 but far below the 14.7 percent peak during the pandemic.
These figures are generally viewed as favorable, said Karen Dynan, former chief economist at the U.S. Treasury and professor at Harvard’s Faculty of Arts & Sciences and Kennedy School. Yet public perception diverges sharply: only 25 percent of Americans believe they can improve their standard of living, the lowest level since the 1987 stock market crash, according to a Wall Street Journal/NORC poll. Moreover, over 75 percent doubt the next generation will enjoy a better quality of life.
Dynan noted that this widespread negativity appears inconsistent with macroeconomic data. However, she emphasized that people’s financial anxieties are not unfounded. Costs such as auto financing and mortgage closing fees—pressures not fully captured in broad indices like the Consumer Price Index—contribute to real hardship. Stefanie Stantcheva, an economist at Harvard who leads the Social Economics Lab, added that official statistics often overlook regional, demographic, and sector-specific differences, offering a high-level view that may not reflect individual realities.
For example, inflation disproportionately affects lower-income households, a phenomenon known as inflation inequality. This disparity is invisible in national averages, leaving policymakers with an incomplete understanding of lived economic experiences. Kenneth Rogoff, professor of economics at Harvard, observed that personal well-being is often measured relative to past conditions, neighbors’ lifestyles, and social media portrayals—factors that amplify dissatisfaction even when aggregate data improves.
Additional stressors include rising borrowing costs on credit cards and vehicles, along with soaring housing prices across much of the country. These burdens are especially acute for younger adults, who also face a competitive job market, Rogoff noted. Stantcheva highlighted a growing tendency toward zero-sum thinking— the belief that one person’s gain necessarily comes at another’s expense—particularly among younger populations in wealthy nations.
Political narratives also shape economic perceptions more than raw data. People often rely on cues from political figures or preferred media sources rather than statistical reports when forming opinions about economic health. Furthermore, recent reversals in workplace benefits—such as the end of remote work options—and reductions in federal funding for public services like education, healthcare, and transit have had tangible local impacts. These changes, Dynan suggested, may be internalized as economic discontent, even if they stem from broader social shifts.
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Why are Americans so pessimistic about economic prospects? — Harvard Gazette
There is some uncertainty mostly driven by the new global tariffs, but overall the U.S. economy is doing reasonably well, economists say.
Still, Americans seem to be feeling disproportionately pessimistic about their economic prospects for reasons that aren’t totally clear to scholars — and may not be directly connected to the economy itself.
The Federal Reserve is widely expected to cut interest rates this week. Core inflation remains around 3 percent — 3.1 percent for August, according to federal data released Thursday. Unemployment hit 4.3 percent in August, above a record low of 3.4 in April 2023 but far below the pandemic high of 14.7 percent in 2020.
Those numbers aren’t great but still look “pretty good,” said Karen Dynan, former chief economist at the U.S. Treasury and a professor of the practice of economics and public policy at the Faculty of Arts & Sciences and Harvard Kennedy School.
But that sentiment appears out of sync with how most Americans are feeling: Only 25 percent believe they have a good chance to improve their standard of living, the lowest share since the stock market crashed in 1987, according to a recent Wall Street Journal/NORC poll.
More than 75 percent say they are not confident the next generation will have a higher standard of living than they do, the poll also showed.
“A lot of the pessimism doesn’t seem consistent” with the data, Dynan said.
So why the disconnect?
“It’s not that Americans or the data are wrong — consumers do have legitimate concerns. It’s that some of the financial pressures people are feeling, like increased financing costs for auto loans or closing costs on home mortgages, don’t necessarily show up in the major datasets like the Consumer Price Index,” said economist Stefanie Stantcheva, whose Social Economics Lab at Harvard studies how people understand economic issues and policies.
Government statistics tend to take a very broad view so geographic and demographic disparities or variations across industries and sectors often get overlooked, Dynan said.
“A lot of the data we have speak to conditions in the economy overall. The unemployment rate that we look at is for the nation as a whole; the GDP number is about how the entire pie is growing,” she said. “The data that we have on how individuals are doing is more limited and less timely.”
For instance, lower-income people often face higher inflation than the wealthy, something known as inflation inequality. That’s not captured by the usual economic measures, leaving economists with an incomplete picture of people’s “lived experiences” with the economy, Stantcheva said.
“A lot of people’s feeling of satisfaction and well-being is relative to what they’re used to, what they see their neighbors enjoying, and increasingly, what they see on the internet,” said Kenneth Rogoff, professor of economics and Maurits C. Boas Chair of International Economics at Harvard.
25% Of Americans believe they have a good chance to improve their standard of living, according to a recent WSJ/NORC poll
Pressure that rising financing costs for things like credit cards and car loans are putting on consumers, or anxiety over the high price of housing across the U.S. aren’t getting quantified by economic reports. Still, they are leaving many pretty grim about their economic future, especially young adults who also face an increasingly tough job market, said Rogoff.
Of late, Stantcheva notes, there’s been a rise in “zero-sum thinking” about the economy.
“This idea that if you do well, or a group of people does well, it means someone else must be doing worse, someone else must be losing. We see that much more pronounced among younger generations, not just in the U.S., also in other rich countries,” she said.
Politics also now plays an outsized role in shaping what the public knows about the economy and how they perceive it, whether negative or positive. People tend to give more weight to how their trusted political leaders or favorite news outlets characterize the economy than what government statistics seem to show, said Dynan.
A confluence of changes that consumers experience daily — like continuing high prices, remote work and other perks employers offered only a couple of years ago but have since clawed back, and staffing and funding cuts across the federal government earlier this year — are starting to be felt locally as institutions and services people see and use, like schools, healthcare, and transportation, close or face cutbacks.
“I think some of these social changes may be weighing on people and then end up expressed as views about the economy,” Dynan said.