While the official numbers point to a resilient U.S. economy in 2025, many Americans still feel like they’re living through a recession. Wages are up, unemployment is low, and economic growth has stabilized and yet, public confidence is deeply pessimistic. The disconnect between economic reality and economic sentiment is not only surprising but increasingly influential in shaping national policy, financial markets, and personal decisions.
So why do so many Americans feel the economy is broken even though the data says otherwise?
This article breaks down the contrast between perception and reality and what it means for investors, policymakers, and the average American household.
Economic Indicators Tell a Positive Story
Let’s start with the data. According to the U.S. Bureau of Economic Analysis, U.S. GDP grew at a rate of 2.8% in the first quarter of 2025. That’s a healthy number by historical standards, signaling continued business activity, consumer spending, and investment across sectors.
At the same time:
- Unemployment is at 3.9%, hovering near its lowest levels in over 50 years.
- Wage growth is accelerating, especially in blue-collar industries.
- Inflation has eased significantly from the 2022–2023 peaks, now at 2.6% year-over-year.
- The stock market has shown consistent recovery, with the S&P 500 up over 12% year-to-date.
These numbers, on their face, tell the story of a country that is economically stable, if not thriving. Business investment is rising, the labor market remains strong, and the supply chain disruptions of the pandemic era have largely been resolved.
But Public Sentiment Paints a Darker Picture
Despite the strong data, consumer confidence is near recession-era lows. A recent University of Michigan sentiment survey showed that nearly 65% of respondents believe the U.S. economy is on the wrong track. In retail, discretionary spending is slowing. In politics, economic dissatisfaction is a top concern for voters. And on social media, stories of financial stress dominate the conversation.
This isn’t just anecdotal the perception gap is real, measurable, and growing.
So what’s driving it?
1. Sticky Inflation: Prices Are Still Higher Than People Remember
Although inflation has technically slowed, prices remain noticeably higher than pre-pandemic levels. Americans aren’t comparing prices to last quarter they’re comparing them to 2019. Gas, groceries, rent, insurance, and healthcare are still substantially more expensive than they were five years ago.
This phenomenon where current price levels feel “stuck” even after inflation cools is driving resentment and mistrust. People feel like their paychecks don’t go as far, even though they’re technically earning more.
2. The Psychological Aftershock of Economic Crises
From the pandemic to inflation to interest rate hikes, Americans have experienced four straight years of financial disruption. Many have seen their savings depleted, their investments struggle, or their housing costs skyrocket. Even if things are stabilizing, the emotional toll has created a sense of fragility as if the next downturn is just around the corner.
This kind of economic PTSD makes it harder for people to believe that the recovery is real or sustainable.
3. Interest Rates Are Squeezing the Middle Class
While the Federal Reserve’s aggressive rate hikes helped slow inflation, they’ve also made it more expensive to borrow money. Credit card rates are above 20%, auto loans are historically high, and mortgage rates remain elevated, freezing many would-be homebuyers out of the market.
This matters because middle-class families often rely on credit to manage large purchases. Their financial pressure is real and growing even if they’re fully employed.
4. Media Narratives Shape Perception More Than Data
Another important factor is how the economy is portrayed. The average American doesn’t pore over BEA spreadsheets or Fed statements. They get their economic updates from headlines, social media, and anecdotal stories.
Unfortunately, bad news spreads faster and wider. A viral video of a family being evicted or a story of soaring rent will have a greater emotional impact than a dry economic briefing on GDP growth.
In the age of TikTok, Instagram, and short-form news, “vibes” often matter more than facts. It’s not that the data is wrong it’s that it isn’t felt.
Why This Disconnect Matters More Than Ever
This divergence between sentiment and reality has major implications:
- Policy Decisions: Politicians often respond more to voter emotion than economic reality. Misaligned public sentiment could push for premature interest rate cuts, new stimulus plans, or regulatory changes that aren’t aligned with actual conditions.
- Investor Behavior: Retail investors may pull back from markets based on fear rather than fundamentals, missing out on long-term growth opportunities. Sectors that are healthy may be undervalued simply due to negative sentiment.
- Consumer Choices: When people believe a recession is coming even when it isn’t they tend to spend less, save more, and delay major life decisions like buying a home or starting a business. Ironically, this can contribute to the very slowdown they fear.
Is the Disconnect Closing Anytime Soon?
That remains to be seen. While the Federal Reserve has signaled it may pause or even reverse rate hikes in the second half of 2025, inflation psychology is slow to reverse. And with an upcoming election season likely to amplify economic criticism, the “vibes” could remain gloomy for a while.
Still, the numbers continue to point to a fundamentally strong economy. Jobs are plentiful, companies are profitable, and wages are rising. For savvy investors and informed consumers, this may be a chance to step ahead of sentiment and trust the data.
