Full Breakdown
Economic Gloom Persists Despite Strong Indicators, Says Economist
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Economic Performance vs. Consumer Mood
University of Michigan data show that the consumer-sentiment index has hovered around 52 this summer—essentially unchanged from May 1980 when unemployment was near 8 % and inflation approached 14 %. Today, joblessness is roughly half that rate and price growth is about a quarter of the 1980 level. Wolfers’ model, which uses decades of price and employment data, predicts a sentiment score near 82 under those conditions, leaving a 30-point shortfall from the observed 52.
Wolfers’ Model and the Trust Gap
Justin Wolfers, an economist at the University of Michigan, argues that the primary driver of the gap is a dramatic decline in public confidence in President Donald Trump’s economic policy. Survey questions that ask whether the government is doing a “good” or “poor” job on economic policy show the “poor” rating outpacing the “good” rating by 66 points in May 2026, up from a 14-point gap in late 2024. The previous record high for this gap was 52 points during the 2011 debt-ceiling standoff. When Wolfers fed his model only price and job data through October 2024, it forecast a modest two-point decline in sentiment; the actual drop was 17 points. Adding the public’s harsher policy verdict to the model produced a predicted decline of roughly 20 points, which closely matched the observed slump.
Verbatim Quote
- “In economics, we don't call that a near miss.” — Justin Wolfers, University of Michigan economist
Why It Matters
Wolfers contends that the mismatch between solid macroeconomic fundamentals and pervasive pessimism stems not from misreading the economy but from a “record collapse” in faith in the administration’s handling of economic policy. If public trust remains low, consumer sentiment may stay depressed even as objective indicators improve, potentially influencing spending, investment, and future policy debates.