The stock market may be soaring, but many Americans aren't celebrating. As the country heads toward another midterm election, a University of Michigan expert says that while investors are benefiting from record stock prices fueled in part by artificial intelligence, many households remain focused on a different reality: the rising cost of groceries, housing and gas.
Joanne Hsu, director of U-M's Survey of Consumers, explains why Americans are experiencing the same economy in very different ways-and what those perceptions could mean as voters prepare to head to the polls.
Artificial intelligence wasn't on most consumers' radar a year ago. How has that changed?
The change has been remarkable. Just a year ago, virtually no one mentioned AI during our interviews. Today, about 13% of consumers bring it up spontaneously. What's interesting is that people don't all see AI the same way. Some believe it will boost the economy and their investments, while others worry it could eliminate jobs, make it harder for young people to find work, or increase energy use and affect local communities through data centers.
Your survey suggests there's a growing divide between people who own stocks and those who don't. What's driving that difference?
AI has helped fuel record stock market gains, but those gains mainly benefit people who own significant investments. Consumers with substantial stock holdings tend to feel much more optimistic about the economy than those with little or no stock wealth. For many Americans, rising stock prices don't offset the impact of higher everyday costs, so they're evaluating the economy through a very different lens.
Inflation has eased from its peak, yet many consumers remain worried about prices. Why?
Even though inflation has slowed, prices are still much higher than they were just a few years ago. Consumers don't compare today's prices to last month-they compare them to what they used to pay. That means many households continue to feel financial strain, even as overall inflation moderates.
Gas prices appear to play an outside role in how people feel about the economy. Why are they so important?
Gasoline is one of the prices consumers see most often, so changes are immediately noticeable. Earlier this summer, gas prices declined following a ceasefire in the Middle East, and consumer sentiment improved. Whether that improvement lasts will depend in part on what happens to gas prices in the coming months.
What will you be watching most closely during the midterm election?
We'll be paying close attention to how Americans' economic expectations evolve as Election Day gets closer. We're currently collecting data on what consumers expect from the midterm elections, and those results will be released in October. They should provide new insight into how economic conditions are shaping public attitudes during the campaign.
After more than 80 years of measuring consumer sentiment, what continues to surprise you?
One of the biggest lessons is that people experience the economy differently. Two people can look at the same economic headlines and come away with completely different conclusions depending on their financial situation, whether they own investments, and the costs they face in everyday life. At the same time, despite different perspectives about the moment, people tend to broadly agree whether the economy is on an upward or downward trajectory. That's why consumer sentiment remains such an important measure-it captures how the economy feels to people right now, looking to the future, and not just what the economic indicators say about the past.
Written by Jared Wadley
