A Look at the Economy Ahead of the Next Fed Meeting

In May’s Consumer Trendwatch, the team at Trendency discussed how the views Americans hold on their individual economic standings are based more on their political ideologies rather than traditional financial measurements such as annual income. This bias has made it challenging to truly engage with the public and get an honest understanding of how Americans feel about both their current economic standing and the economy at large. Nonetheless, Trendency continues to engage with Americans on how they’re feeling about their own personal financial security as well as the direction the overall economy is heading, with and without a partisan lens.

The Economy Overall

After declining throughout the end of 2023, there was an uptick at the beginning of the year in the percentage of Americans feeling less secure about the economy. Throughout Q2 of 2024, Americans generally began to feel better about the economy, with negative sentiment dropping and positive (along with neutral) feelings increasing. Positive feelings increased from 19% to 25% from May to July, while neutral feelings (that things are about the same) increased from 32% to 35%. Those who are feeling less secure are inversely decreasing as we see the percentage of Americans feeling the economy is less secure compared to 12 months ago decreasing from 60% last July down to 38% this year.

When asked what percent of the time they are feeling positive about their economic situation and what percent of the time they are feeling more negative, optimism wins out slightly, with Americans feeling positive 54.4% of the time and negative 45.6% of the time, on average. Looking at the breakdown of these responses, the spread is relatively even, with 15% of Americans feeling very negative (meaning they feel negative 80-100% of the time) and 15% leaning in this direction (feeling negative 60-79% of the time). On the opposite end of the scale, 18% of Americans are feeling positive 80-100% of the time and an additional 18% feel positive 61-80% of the time. About one-third (34%) are in the middle feeling positive 41-60% of the time.

Views based on how much a person earns annually haven’t changed much since May. Not surprisingly, Americans who make over $80,000 per year remain the most likely to say that their personal economic situation is better off (28%, compared to 29% in May). Americans who make less than $40,000 are the group most likely to say they are worse off, but they’ve increased their positive views, growing from 12% feeling more secure back in May to 17% currently. Those who make between $40,000-$80,000 annually have also increased from 17% to 21% who believe they are better off compared to a year ago.

Regardless of income, most Americans say that they feel better off compared to a year ago. In our previous report, we mentioned the correlation between income levels and the probability of feeling better or worse off. Two months later, this trend remains the same with lower incomes (under $40k) more likely to say they feel worse off compared to a year ago and those at higher income levels (over $80k) tending to say they are feeling better about their personal financial situation. The data for those who feel about the same about their personal financial situation is similar across the board.

Breaking this question down by demographic groups, we find that income is still not the only demographic differentiator when it comes to how Americans feel about their personal economic situation. White Americans are more likely to say they’re worse off compared to one year ago (37 points), while Latino/Hispanic and Black/African American panelists are morel likely to say things are about the same for them compared to this time last year. Men are the least likely to report that their economic situations have been stable since last year, but women are more likely than men to say they’re worse off. So, while the overall numbers suggest an upward trend in terms of positive feelings, this largely depends on demographic backgrounds, including but not limited to income, race/ethnicity, and gender.

Inflation

As the Trendency data showed us back in May, inflation and the possibility of a recession are two concerns that tend to drive people’s perception about the economy. While other indicators such as job growth and the stock market factor in, data from the past few years has shown that views on inflation and recession fears have a bigger impact.

Concerns surrounding inflation overall are lower compared to a year ago, but are higher now than they were back in January. The average answer last July (on a scale of 0-100, where 100 indicates maximum concern) sat at 78 before dipping as low as 70 in January of this year. As of the time of this report, the average is hovering around 73 out of 100.

Unlike concerns around inflation, fear of a recession tends to be more steady. In July of last year, the average level of concern about a recession stood at 62 before slowly decreasing throughout the rest of the year and the first quarter of 2024. Since the end of March, the average concern has remained right around 60 out of 100.

Like many aspects of our lives, views on the economy have become increasingly partisan. Despite party affiliation, national data suggests many Americans believe the economy is heading in a better direction and are also generally feeling better about their personal economic situations. The Federal Reserve is expected to meet again on July 31st, where many are anticipating Jerome Powell to hint at the possibility of lowering interest rates by the end of the year. The overall numbers around the economy tend to be positive and are much stronger than many other G20 countries, and, as this data has shown, Americans are less likely to feel negatively about things overall.