The Economy Looks Great. Americans Feel Terrible. Why?

Unemployment at 4.3%. Wages up 3.7%. Productivity soaring at 2.7%. The S&P 500 climbing 14% since inauguration. By almost every metric, the American economy is thriving under Trump's second term.

So why do Americans feel worse about their finances than they did during the Great Recession?

When Good Numbers Tell a Bad Story

Last week's government reports painted a picture of economic resilience. Employers added 130,000 jobs in January, consumer prices rose just 2.4% annually—barely above the Fed's target—and purchasing power has grown significantly since Trump took office.

The productivity surge is particularly striking. Stanford economist Erik Brynjolfsson calculates that US productivity grew nearly twice as fast in 2025 as it had over the previous decade. This should be cause for celebration—more output per worker typically means higher living standards and wages.

Yet consumer sentiment has cratered 26% since inauguration, now sitting near historic lows. Trump's economic approval ratings have gone underwater. The disconnect between data and perception has never been starker.

The Essentials Are Still Expensive

Former Biden White House economist Mike Konczal offers one explanation: while wages have outpaced overall inflation, they haven't kept up with the cost of necessities.

Americans can delay buying a new TV, but they can't skip groceries. Housing, healthcare, food, and transportation—the unavoidable expenses—have been rising faster than headline inflation since the pandemic. Households are forced to dedicate larger budget shares to these must-haves, squeezing discretionary spending.

Interestingly, since Trump's inauguration, wage growth has actually outpaced most essential goods. But this improvement might feel invisible to consumers already exhausted by years of high prices.

The Utility Bill Problem

The devil's in the details. While overall energy costs fell 0.1% last year, electricity and natural gas bills surged even as gasoline prices dropped.

This matters because of negativity bias—humans pay more attention to losses than gains. When you're already stretched thin, a rising electric bill feels more significant than cheaper gas. Americans entered 2025 considering living costs "intolerably high." Modest improvements in some areas couldn't offset the sting of increases in others, especially when the president had promised prices would fall.

It's the psychological equivalent of being told your fever is down while your headache gets worse.

The White-Collar Recession

Beneath the low unemployment rate lies a more troubling trend. America added only 181,000 jobs all of last year—the worst performance since 2010 outside of the pandemic.

The pain is concentrated in professional sectors. Finance, insurance, information, and business services have collectively shed 1.9% of their workforce since late 2022. This is historically anomalous—these industries typically grow steadily outside recessions.

The culprit? The same AI-driven productivity boom that looks so impressive in aggregate statistics. Companies are discovering they can maintain output with fewer workers, particularly in knowledge-based roles. It's economic efficiency with a human cost.

When Productivity Becomes Personal

The productivity surge tells a complex story. Yes, the economy is generating more output per worker-hour. But for individual workers, this often translates to job insecurity rather than prosperity.

Real wage growth slowed across income levels in 2025. High earners saw wages rise just 0.4%—down from 1.1% annually in previous years. Low-income workers actually lost ground, with real wages declining after years of 2.4% annual growth.

Workers have fewer exit options, less bargaining power. The job market that once favored employees has cooled considerably.

The Influence of the Influenced

White-collar workers wield outsized influence in media and politics. Their economic anxiety may disproportionately shape national perceptions of economic health. When journalists, analysts, and political operatives feel financially insecure, that sentiment ripples through public discourse.

This creates a feedback loop: professional-class anxiety influences coverage and commentary, which in turn shapes broader public opinion about economic conditions.