Voters Had Accurate Perceptions of the Economy, Contrary to Misleading Data.
This article explores the reasons behind the discrepancies in government statistics, highlighting why unemployment is elevated, wages are declining, and economic growth appears weaker than reported.
TroibNews 
Before the presidential election, many Democrats found themselves at a loss regarding the apparent disconnect between the “economic reality” indicated by various government statistics and the public's on-the-ground perceptions of the economy. Numerous individuals in Washington expressed frustration at the public's inability to recognize the strength of the economy. They attributed this disconnect to right-wing echo chambers that were persuading voters with unfounded narratives about America’s decline.
What they often overlooked was the possibility that a different factor might be causing this disconnect — that perhaps government statistics were fundamentally flawed or might not accurately represent the true state of the economy. What if the more pessimistic assessments of the economy were closer to reality?
I share some of these frustrations. Having served as comptroller of the currency during the 1990s, I have spent a significant part of my career assessing the discrepancies between public perception and economic reality, especially in finance. Many officials I have advised, including members of the Federal Reserve and regulatory agency leaders, have told me they believe it is their duty to focus on the economy as measured by hard numbers, considering government statistics as reliable indicators of reality.
However, as I broadened my focus from finance to the overall economy in recent years, the growing disconnect between “hard” government numbers and popular perception has led me to question this blind faith in statistics. My experiences in both Washington and as an adviser to lenders and investors have heightened my skepticism about whether these numbers accurately capture the realities of unemployment, wage growth, and economic strength.
Repeatedly, the numbers have suggested to many in Washington that unemployment rates are low, wages are rising for middle-class Americans, and that economic growth benefits everyone. But during my travels across the country, I observed a starkly different situation: cities that appeared increasingly rundown and regions that seemed abandoned. A homeless encampment was situated right outside the Federal Reserve in D.C. I noticed another trend: Democrats tended to trust the economic indicators more than Republicans, who seemed to rely more on their personal observations.
This gap in perception carries significant implications within the nation’s capital. For many years, a small group of federal agencies has been responsible for reporting similar economic statistics, often using the same methodologies. Yet, few have questioned whether the figures released actually reflect reality. Driven by my skepticism, I assembled a research team at the Ludwig Institute for Shared Economic Prosperity to investigate some of the most commonly cited headline statistics.
What we uncovered was truly startling. The fundamental conclusion is that for over 20 years, including the months leading up to the election, voter perceptions were more aligned with reality than the statistics provided by the government. Our findings confirmed that while the data collected by various agencies is largely accurate and its staff well-meaning, the methods used to calculate the headline statistics are fundamentally flawed, creating an overly optimistic picture of the economic situation.
One particularly misleading example is the unemployment rate, known as the U-3 statistic. This figure misrepresents the reality in several critical ways. It considers millions of under-employed individuals as “employed,” failing to account for those working only a few hours a week while seeking full-time positions or for discouraged Americans who have stopped looking for work altogether. Additionally, it does not reflect the reality of individual income levels; a person could be homeless yet counted as employed if they earn any money intermittently.
I doubt that those who pointed to near-record low unemployment numbers during the recent election fully appreciated that the 4.2 percent figure in November included individuals in precarious living situations. Remarkably, if we adjust this statistic to consider those who can only find part-time work or earn a poverty wage, the actual unemployment figure rises to 23.7 percent. This means nearly one in four workers in America today is effectively unemployed — hardly something worth celebrating.
The situation is similarly distorted when examining how much Americans are earning. The widely-used “weekly earnings” indicator tracks the wages of full-time workers while excluding those who are unemployed or in part-time positions. As a result, the prevailing belief is that the median wage in the U.S. is approximately $61,900. However, when including all individuals in the workforce, including part-time workers and unemployed seekers, our research shows the median wage is actually around $52,300 annually. This means American workers on the median earn 16 percent less than the statistics suggest.
Inflation, perhaps the most significant issue of the 2024 campaign, illustrates a similar discrepancy. Democrats highlighted decreasing inflation rates by Election Day, despite prices remaining high compared to pre-pandemic levels. They also pointed to rising wages, based primarily on data from the Consumer Price Index (CPI), which measures the prices of approximately 80,000 goods and services.
However, the CPI fails to accurately reflect reality for those with lower incomes. Many of these families purchase only a small fraction of the items tracked by the CPI and spend a more considerable proportion of their income on essentials such as groceries, healthcare, and rent. This leads to an underestimate of inflation's impact on the majority of Americans. Our research developed an alternative measure that excludes the price fluctuations of luxury goods and focuses on essential items, revealing that since 2001, the cost of living for modest-income Americans has risen 35 percent faster than what the CPI shows. Essentially, maintaining a working-class lifestyle has become substantially more expensive than perceived.
The aftermath of the pandemic intensified this effect. In 2023, while the CPI indicated inflation rose by 4.1 percent, our alternative research suggested a more accurate increase of 9.4 percent in the cost of living. This brings the claim that wage gains outpaced inflation into question: when accounting for our revised measures of inflation and weekly earnings, it becomes clear that median purchasing power fell by 4.3 percent in 2023. Reality was evidently more dire for the majority of Americans than the prevailing statistics suggested before the 2024 election.
Lastly, we must consider gross domestic product (GDP), which is often viewed as a key indicator of prosperity. While tracking the overall production value has merits, GDP can obscure how wealth is distributed. It fails to show if a small portion of the population captures most of the benefits from economic growth while others see little advantage. This has been a significant trend; since 2013, individuals with bachelor’s degrees or higher have experienced improved material well-being, while those without high school diplomas have seen no significant growth in their economic standing. Meanwhile, geographic disparities have widened, with affluent cities thriving as places like Youngstown, Ohio, and Port Arthur, Texas, continue to lag behind. The important takeaway is that despite the growth in GDP, underlying disparities remain largely invisible.
These statistical inconsistencies collectively create an illusion of economic health that obscures the challenges faced by middle- and lower-income households. The issue isn't that some Americans benefitted from four years of Bidenomics — some undeniably did — but rather that the majority of those in modest circumstances have experienced setbacks over the past two decades, with the last four years providing insufficient improvement for the lower 60 percent of income earners.
While the current indicators have value, there is a pressing need to provide policymakers with a more comprehensive understanding of the broader economic landscape. We should explore new ways to enhance our insight into the nation’s economic conditions on a monthly basis. The indicators my colleagues and I have devised could serve as a foundation for or inspire government-sponsored alternatives. There is an urgent demand for change.
This issue transcends partisan lines; policymakers from both parties would gain from a more precise understanding of the economic realities faced by Americans. In actuality, both Democrats and Republicans could be misled during the 2024 cycle — though, in this instance, the dissatisfaction hurt the incumbent party more.
At a time when trust in institutions is waning, we are reminded of a classic quote by former Senator Daniel Patrick Moynihan: while we are entitled to our opinions, we are not entitled to our own facts. This principle should hold true in the field of economics as well. However, if the leading indicators continue to misrepresent reality, the facts will not apply. We have the potential to clear the illusions that misled Democrats during the 2024 election. The pressing question is whether we will take the necessary steps to recalibrate our approach.
Max Fischer contributed to this report for TROIB News
What they often overlooked was the possibility that a different factor might be causing this disconnect — that perhaps government statistics were fundamentally flawed or might not accurately represent the true state of the economy. What if the more pessimistic assessments of the economy were closer to reality?
I share some of these frustrations. Having served as comptroller of the currency during the 1990s, I have spent a significant part of my career assessing the discrepancies between public perception and economic reality, especially in finance. Many officials I have advised, including members of the Federal Reserve and regulatory agency leaders, have told me they believe it is their duty to focus on the economy as measured by hard numbers, considering government statistics as reliable indicators of reality.
However, as I broadened my focus from finance to the overall economy in recent years, the growing disconnect between “hard” government numbers and popular perception has led me to question this blind faith in statistics. My experiences in both Washington and as an adviser to lenders and investors have heightened my skepticism about whether these numbers accurately capture the realities of unemployment, wage growth, and economic strength.
Repeatedly, the numbers have suggested to many in Washington that unemployment rates are low, wages are rising for middle-class Americans, and that economic growth benefits everyone. But during my travels across the country, I observed a starkly different situation: cities that appeared increasingly rundown and regions that seemed abandoned. A homeless encampment was situated right outside the Federal Reserve in D.C. I noticed another trend: Democrats tended to trust the economic indicators more than Republicans, who seemed to rely more on their personal observations.
This gap in perception carries significant implications within the nation’s capital. For many years, a small group of federal agencies has been responsible for reporting similar economic statistics, often using the same methodologies. Yet, few have questioned whether the figures released actually reflect reality. Driven by my skepticism, I assembled a research team at the Ludwig Institute for Shared Economic Prosperity to investigate some of the most commonly cited headline statistics.
What we uncovered was truly startling. The fundamental conclusion is that for over 20 years, including the months leading up to the election, voter perceptions were more aligned with reality than the statistics provided by the government. Our findings confirmed that while the data collected by various agencies is largely accurate and its staff well-meaning, the methods used to calculate the headline statistics are fundamentally flawed, creating an overly optimistic picture of the economic situation.
One particularly misleading example is the unemployment rate, known as the U-3 statistic. This figure misrepresents the reality in several critical ways. It considers millions of under-employed individuals as “employed,” failing to account for those working only a few hours a week while seeking full-time positions or for discouraged Americans who have stopped looking for work altogether. Additionally, it does not reflect the reality of individual income levels; a person could be homeless yet counted as employed if they earn any money intermittently.
I doubt that those who pointed to near-record low unemployment numbers during the recent election fully appreciated that the 4.2 percent figure in November included individuals in precarious living situations. Remarkably, if we adjust this statistic to consider those who can only find part-time work or earn a poverty wage, the actual unemployment figure rises to 23.7 percent. This means nearly one in four workers in America today is effectively unemployed — hardly something worth celebrating.
The situation is similarly distorted when examining how much Americans are earning. The widely-used “weekly earnings” indicator tracks the wages of full-time workers while excluding those who are unemployed or in part-time positions. As a result, the prevailing belief is that the median wage in the U.S. is approximately $61,900. However, when including all individuals in the workforce, including part-time workers and unemployed seekers, our research shows the median wage is actually around $52,300 annually. This means American workers on the median earn 16 percent less than the statistics suggest.
Inflation, perhaps the most significant issue of the 2024 campaign, illustrates a similar discrepancy. Democrats highlighted decreasing inflation rates by Election Day, despite prices remaining high compared to pre-pandemic levels. They also pointed to rising wages, based primarily on data from the Consumer Price Index (CPI), which measures the prices of approximately 80,000 goods and services.
However, the CPI fails to accurately reflect reality for those with lower incomes. Many of these families purchase only a small fraction of the items tracked by the CPI and spend a more considerable proportion of their income on essentials such as groceries, healthcare, and rent. This leads to an underestimate of inflation's impact on the majority of Americans. Our research developed an alternative measure that excludes the price fluctuations of luxury goods and focuses on essential items, revealing that since 2001, the cost of living for modest-income Americans has risen 35 percent faster than what the CPI shows. Essentially, maintaining a working-class lifestyle has become substantially more expensive than perceived.
The aftermath of the pandemic intensified this effect. In 2023, while the CPI indicated inflation rose by 4.1 percent, our alternative research suggested a more accurate increase of 9.4 percent in the cost of living. This brings the claim that wage gains outpaced inflation into question: when accounting for our revised measures of inflation and weekly earnings, it becomes clear that median purchasing power fell by 4.3 percent in 2023. Reality was evidently more dire for the majority of Americans than the prevailing statistics suggested before the 2024 election.
Lastly, we must consider gross domestic product (GDP), which is often viewed as a key indicator of prosperity. While tracking the overall production value has merits, GDP can obscure how wealth is distributed. It fails to show if a small portion of the population captures most of the benefits from economic growth while others see little advantage. This has been a significant trend; since 2013, individuals with bachelor’s degrees or higher have experienced improved material well-being, while those without high school diplomas have seen no significant growth in their economic standing. Meanwhile, geographic disparities have widened, with affluent cities thriving as places like Youngstown, Ohio, and Port Arthur, Texas, continue to lag behind. The important takeaway is that despite the growth in GDP, underlying disparities remain largely invisible.
These statistical inconsistencies collectively create an illusion of economic health that obscures the challenges faced by middle- and lower-income households. The issue isn't that some Americans benefitted from four years of Bidenomics — some undeniably did — but rather that the majority of those in modest circumstances have experienced setbacks over the past two decades, with the last four years providing insufficient improvement for the lower 60 percent of income earners.
While the current indicators have value, there is a pressing need to provide policymakers with a more comprehensive understanding of the broader economic landscape. We should explore new ways to enhance our insight into the nation’s economic conditions on a monthly basis. The indicators my colleagues and I have devised could serve as a foundation for or inspire government-sponsored alternatives. There is an urgent demand for change.
This issue transcends partisan lines; policymakers from both parties would gain from a more precise understanding of the economic realities faced by Americans. In actuality, both Democrats and Republicans could be misled during the 2024 cycle — though, in this instance, the dissatisfaction hurt the incumbent party more.
At a time when trust in institutions is waning, we are reminded of a classic quote by former Senator Daniel Patrick Moynihan: while we are entitled to our opinions, we are not entitled to our own facts. This principle should hold true in the field of economics as well. However, if the leading indicators continue to misrepresent reality, the facts will not apply. We have the potential to clear the illusions that misled Democrats during the 2024 election. The pressing question is whether we will take the necessary steps to recalibrate our approach.
Max Fischer contributed to this report for TROIB News
