A prominent economist is warning that Americans’ view of who’s running the economy carries consequences that reach far beyond their mood.
University of Michigan economist Justin Wolfers argued in his Platypus Economics newsletter on Friday that the problem is the people steering the economy, not the economy itself. Americans are looking ahead and "don't trust who's steering," he wrote. He added that once in a generation the country gets a president "perceived as a chaos monkey."
Wolfers did not name President Donald Trump. But he tied the sharpest drop in confidence to the past year and a half, a stretch that overlaps with Trump's return to the White House.
The numbers he laid out are stark. Consumer sentiment has hovered near 52, Wolfers wrote, about 30 points below where economic fundamentals suggest it should sit. Americans now feel roughly as bleak as they did in 1980, when unemployment was nearly double today's rate and inflation ran about 14 percent.
Wolfers first laid out the theory earlier in the week. In Friday's post, he took reader questions with producer Augusta Chapman, including whether Americans are simply in a sour mood and blaming whoever holds power. He said the data cuts against that. Questions about where the economy is headed "track their trust in leadership closely," he wrote. Questions about the present, such as whether it's a good time to buy a house, show little connection.
He was careful not to oversell it. "I can't be certain that I've nailed the correlation-versus-causation thing," Wolfers wrote. He called his theory a plausible explanation that "fits the key facts."
Still, he argued the gloom carries real consequences. He described a business owner deciding whether to build a factory now or wait out a messy policy stretch. A president seen as a chaos monkey, he wrote, "can make it hard for businesses to plan."
Wolfers also pointed to a separate gap that opened in 2020, writing that "lots of things broke that year." He flagged a more mundane factor as well. The University of Michigan survey team recently switched from phone interviews to web interviews, a change he said his analysis corrected for.
The past year and a half, he wrote, has a more specific cause.
"Until that changes, a lot of factories may stay on the drawing board."