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The U.S. economy has momentum: Inflation is down, stocks are breaking records and the job market is exceptionally strong. And yet, many Americans haven't take notice.

Despite several economic indicators suggesting progress, 63% of Americans say the economy is getting worse and only 30% say it's improving, according to a Gallup survey last month. Meanwhile, 45% of respondents describe the economy as “poor" and another 29% says it’s “only fair."

Is the public under-appreciating the positive aspects of the current economy? Maybe.

“I'm always hesitant to tell people that they are wrong about how they feel,” says Michel Linden, senior policy fellow at the Washington Center for Equitable Growth, a left-leaning think tank. With that caveat, he says it's “puzzling” that economic gains are not translating into more support for the Biden administration’s handling of the economy ahead of the 2024 election.

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Democrats tout that inflation has fallen to the ballpark of 3%, and unemployment is still near historic lows. The recession you were warned about? It hasn't happened.

It’s “contrary to what almost anyone predicted was possible,” says Daniel Hornung, deputy director at the National Economic Council. “Fundamentally, we've got a strong economy and one that has improved significantly over the last year.”

Of course, conservative economic experts see it differently. For them, the public opinion on the economy is evidence of serious issues under the hood. “I don't think it's puzzling at all, actually,” says Richard Stern, director at the Heritage Foundation’s federal budget center.

Stern says the No. 1 issue is the damage of more than two years of sharp inflation. It's thrown people off track in a way that could take years to recover from.

"People have kept their jobs, but their jobs are paying them way less in terms of real dollars," Stern say. "Purchasing power is down thousands of dollars for most American workers."

Given that it’s an election year, there are political motives all around for spinning the economy as better or worse than it is. In reality, conditions probably aren't as rosy as the Biden administration says, nor as gloomy as Republicans claim. Here's what the data tells us.

4 things to love about the current economy

The president likes to say that his administration got the country "back on its feet." Economically speaking, there are some strong numbers to back that up.

1. The job market is strong

The current unemployment rate of 3.7% is still about as good as it gets. It’s up slightly from the record low of 3.4% in January 2023, but anything below 4% is considered full employment.

Americans have jobs, and not only that, they're earning more as labor remains in demand.

“Prices were outstripping the wages," says Harvard economist Jason Furman, a senior fellow at the Peterson Institute for International Economics. "Now the wages are outstripping the prices."

Average hourly wages are rising at an annual rate of 4.5%, which is higher than the inflation rate of 3.1%. Since mid-2023, wages have been beating inflation. Hornung says this wage growth is providing “breathing room” to families.

2. Stocks are rallying

The S&P 500 just hit 5,000 for the first time, the latest milestone in a remarkable run for the U.S. stock market. In just the past year, the S&P 500 is up more than 22%.

The recent gains in the market translate to more money in people's retirement accounts and overall investment portfolios.

3. Savers can actually earn decent returns

Opportunities for meaningful returns in savings accounts are usually one of the advantages of a higher-rate environment — and that's clearly the case currently. The average savings account rate is at the highest point since the Federal Deposit Insurance Corp. (FDIC) began keeping track in 2009.

High-yield savings accounts are offering rates above 4%. That's easy money without any risk.

And if you have savings you don’t plan to touch for some time, you can lock in an even higher rate with a certificate of deposit (CD).

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4. Lower rates are in sight as inflation eases

By June, the market expectation is for the Federal Reserve to have enacted at least a quarter-point rate cut. It would be the first rate cut in four years and would be a pivotal moment following the period of intense tightening in the fight against inflation.

If the predictions hold true, borrowing money for things like homes and cars would become cheaper and people could refinance existing loans. Lower rates can also stimulate economic growth leading to higher stock prices.

Rate cuts aren’t guaranteed this spring, but the fact it’s a real possibility represents progress, economists say.

4 things to hate about the current economy

Of course, it can simultaneously be true that the economy has improved and there are ongoing challenges, like high housing costs and interest rates. Here are four big reasons why the GOP says the economy is in shambles.

1. Everything is expensive

People are struggling to afford rent, bills and groceries at higher prices. Since January 2021, consumer prices are up more than 17%. That’s the worst three-year stretch of inflation in more than four decades.

The Fed's higher interest rates have finally brought inflation down, but Americans lost so much purchasing power in 2021 and 2022 that the damage has been done.

“The vast majority of Americans went to work for two years and got further behind. And they haven't forgotten that,” says Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank. “Inflation was extremely damaging to people's perception of the economy.”

2. Housing is unaffordable

In an ideal economy, more Americans who want to buy homes would be achieving their goals. Instead, the housing market is moving extremely sluggishly.

Home sales last year were at the lowest level since 1995, according to the National Association of Realtors. Affordability is most buyers' biggest hurdle: Home prices are up 35% in the past three years, and it certainly doesn't help that mortgage rates have soared from 3% in 2021 to 6.77% now.

People with home equity have benefited from the massive jump in housing prices, but the dream of buying a home now feels more out of reach for many renters.

Conditions are expected to get better later this year. Mortgage rates should fall if the Fed cuts interest rates and home prices could dip slightly, though most experts are forecasting a very small degree, if anything. Still, affordability will remain a challenge for would-be homebuyers.

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3. Insurance costs are eating up more of Americans' budgets

Inflation has cooled for most things, but insurance prices are still soaring, especially for home and auto policies.

Home insurance prices are on track for double-digit increases in 2024, and some homeowners fear rising insurance costs could price them out of where they live. Insurance prices have climbed so high, so fast that 12% of homeowners say they are skipping insurance altogether due to the cost.

The price of motor vehicle insurance, meanwhile, is up 20.6% in the past year, according to the consumer price index.

4. High interest rate debt makes borrowing even more expensive

Rates for all types of loans are still painfully high right now. Borrowing money for really important things — for example, homes, cars and education — is often considered “good debt.” But an auto loan with a 9.7% APR, for example, is far from ideal.

It means people are forced to choose between delaying financial goals or taking on high-interest rate debt. You can only drive an old car or live in a home you've outgrown for so long. At some point, people bite the bullet and take on debt with an undesirable rate.

That, in turn, can lead to month-to-month struggles to afford your bills. Auto loan delinquencies just reached the highest levels in 10 years, and loans opened in 2022 and 2023 are "performing worse than loans opened in earlier years, perhaps because buyers during these years faced higher car prices and may have been pressed to borrow more, and at higher interest rates," researchers said.

Credit card delinquencies are also at a 10-year high and balances are up to $1.13 trillion, which is 14.5% higher than a year ago.

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