DRAFT: Why the New and Sharp Disjunction Between the State of the Economy & Consumer Sentiment?

Inflation, Social & Non-Social Media, Plague Memory,or General Referred Pain...

This was supposed to be my Project Syndicate column for November. But I could never get it into any kind of shape to be worth submitting at anything close to the required length…

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This is quite a puzzle:

Why the new and sharp disjunction between the state of the economy & consumer sentiment?: inflation, social and non-social media, plague memory, or general referred pain? The general rule in such a situation is to say “all of the above”. But which is the bigger contributor? Can we figure it out?

But first—and important—a note: this disjunction does not appear to be affecting consumer spending. Consumer sentiment has, since the plague, not been a good predictor of current or future actual consumer spending:

Economist: The pandemic has broken a closely followed survey of sentiment: ‘Americans’ opinions about the state of the economy have diverged from reality…. Since covid began, the correlation between sentiment and both current and future spending has vanished…. [A] vibecession today [does not] spell… a recession tomorrow…. Bad vibes may be the new normal…

As a macro forecasting factor, it appears to be a null.

But that does not mean this disjunction should be ignored. It might affect voting behavior, or change the likelihood that people will vote for crazy neofascist promoters of stochastic terrorism. Is it driving Biden’s relatively low approval ratings? But let me dodge those questions, which I am not qualified to answer, and turn to those I am semi-qualified to answer.

But, alas, only semi-qualified!