The stock market may be soaring, but many Americans aren’t celebrating. As the country heads toward another midterm election, experts at the University of Michigan said that while investors are benefiting from record stock prices, thanks in part to artificial intelligence, many households are still focused on another reality: higher prices for groceries, housing and gas.
Joan Hsu, director of consumer research at UM, explains why Americans are experiencing the same economy in very different ways and what that perception means as voters prepare to head to the polls.
A year ago, artificial intelligence was not on the radar of most consumers. How has that changed?
The change was noticeable. Just a year ago, virtually no one mentioned AI during our interviews. Approximately 13% of consumers currently bring this up voluntarily. What’s interesting is that people don’t all view AI the same way. While some believe this will boost the economy and investment, others fear it could lead to job losses, make it harder for young people to find work, and increase energy use, which could impact local communities through data centers.
Your research suggests that the gulf between those who own stocks and those who don’t is widening. What makes the difference?
AI has helped fuel a record rally in the stock market, but the gains primarily benefit those who own large investments. Consumers who own large amounts of stocks tend to feel much more optimistic about the economy than consumers with little or no stock assets. For many Americans, rising stock prices don’t offset the impact of rising daily living costs, so they’re evaluating the economy in an entirely different light.
Inflation has eased from its peak, but many consumers remain concerned about prices. why?
Although inflation has slowed, prices are still significantly higher than they were a few years ago. Consumers don’t compare today’s price to last month’s price, they compare it to the price they paid previously. This means that many households continue to feel financial strain, even though overall inflation has moderated.
Gasoline prices seem to play an external role in how people feel about the economy. Why are they so important?
Gasoline is one of the prices consumers see most often, so changes are easy to notice. Earlier this summer, consumer sentiment improved as gasoline prices fell following a ceasefire in the Middle East. Whether this improvement continues will depend on what happens to gas prices in the coming months.
What will you be most focused on during the midterm elections?
We will be paying close attention to how Americans’ economic expectations change as Election Day approaches. It is currently collecting data on what consumers expect from the midterm elections, with results expected to be released in October. These should provide new insights into how economic conditions shape public attitudes during election periods.
After more than 80 years of measuring consumer sentiment, what continues to surprise us?
One of the biggest lessons is that everyone experiences finances differently. Two people can look at the same economic news headline and come to very different conclusions depending on their financial situation, whether they own investments, and the costs they face in their daily lives. At the same time, despite differing views about the current moment, people tend to generally agree on whether the economy is on an upward or downward trajectory. That’s why consumer sentiment remains such an important measure. Consumer sentiment captures how people feel about the economy now, looking ahead to the future and not just what economic indicators tell us about the past.
Written by Jared Wadley
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