Inflation has slowed down, and real incomes – typical wages adjusted for inflation – have bounced back to levels last seen before the COVID-19 pandemic.

Democrats campaigned in 2024 on the overall strength of the economy. President Joe Biden proclaimed in the days following the election that the U.S. economy is “the strongest in the world.”

Yet Republicans retook the White House, and are on track to retake both houses of Congress, in part by casting a much dimmer view of the economy. President-elect Donald Trump campaigned on the supposed strength of his first-term economic record, only to characterize current conditions as a “cesspool of ruin.”

Economists argue that Republican nostalgia for the economy under Trump’s first term is largely misguided. However, the GOP’s pessimism over current economic conditions resonated with voters.

Some analysts have dismissed voters’ concerns about the economy as merely a perception problem. Many economists and investors have been calling this mismatch between rosy macroeconomic indicators and public opinion a “vibecession.” The implication is that because there’s no recession underway or around the corner, widespread economic pessimism is unwarranted and irrational.

Given that the economy was the top issue in the minds of most American voters, was the 2024 election decided by vibes alone?

As a political economist and regional planner, I have sought to understand the causes of this apparent mismatch between economic indicators and the perceptions of everyday Americans. What I learned is that, for at least 20 million U.S. households, there is good cause for disillusionment. The method the federal government uses to calculate real incomes tends to capture the economic realities of higher-income people better than those of working-class and middle-class Americans.

Peaking at a 40-year high of 9%........

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