Legendary political strategist Lee Atwater famously observed that “perception is reality.” In other words, how someone feels about a situation often matters more than what the facts actually are.
According to a recent Pew Research Center survey, nearly four in five Americans believe the U.S. economy is in fair or poor condition. But is that perception accurate? Many of the traditional measurements of economic health tell a considerably different story.
In fact, several major economic indicators suggest the U.S. economy remains remarkably strong. According to the Federal Reserve’s latest report, total U.S. household net worth increased by $12.8 trillion in the second quarter of 2026 alone, a gain of approximately 7%. Meanwhile, the economy has continued to expand rather than contract, with real GDP growing at an annualized rate of 2.5% in the first quarter of 2026 and 2.2% in the second quarter, according to the U.S. Bureau of Economic Analysis.
While it is true that the labor market has softened, with companies slowing their pace of hiring, unemployment stood at just 4.2% in September. This suggests that employers, although more cautious about adding workers, have generally been reluctant to make widespread layoffs. Perhaps partly because of this relatively stable employment picture, consumer spending has also continued to rise, with retail sales increasing in both August and September.
Given these numbers, I find the disconnect between economic performance and consumer confidence somewhat perplexing. So what exactly is happening? If the economy is growing, why do so many Americans feel as though their financial circumstances are deteriorating?
First and foremost, inflation remains a problem. Through September, the Consumer Price Index, a common measure of inflation, increased 3.7% over the previous 12 months, with energy prices rising more than 20% and gasoline prices climbing approximately 34%. These increases in everyday expenses have a far more immediate impact on most Americans than any appreciation they may be experiencing in their other assets.
Furthermore, the benefits of rising household wealth are not being distributed evenly. Americans who own substantial amounts of appreciating assets such as stocks or real estate have generally benefited from increasing valuations. However, those on the lower end of the economic spectrum may have experienced little or no comparable improvement in their net worth. In fact, rising property values can have precisely the opposite effect on renters and prospective homebuyers, who face increasingly expensive housing costs.
Finally, higher borrowing costs have placed additional pressure on household budgets. Mortgage rates remain considerably higher than they were just a few years ago, making homeownership less affordable. At the same time, elevated credit card interest rates have made carrying debt even more burdensome. According to the Federal Reserve Bank of New York, Americans’ outstanding credit card balances increased by $21 billion during the second quarter of 2026, reaching $1.26 trillion, just shy of an all-time high.
Perhaps the disconnect between economic performance and public perception isn’t much of a paradox after all. While economists measure the strength of the economy through macro statistics like GDP, employment, and household wealth, most Americans measure it by what remains in their bank accounts after paying their monthly bills.
Both perspectives are valid, but they don’t always tell the same story. And as we approach the midterm elections, our leaders would be wise to remember that voters cast their ballots based on the economy they experience, not necessarily the one economists describe.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)