Solutions Economic and Market Watch

Welcome to the Economic and Market Watch podcast for the week of April 13, 2026. This is Antony Davies.

Something strange is happening in the U.S. economy.

Just ten minutes ago, as I record this, the University of Michigan released preliminary consumer sentiment numbers for April. The numbers are the lowest since the survey began in 1952.

April's preliminary reading is lower than readings in early 1980, when we were in the first of two back to back recessions, inflation topped 10%, and mortgage rates exceeded 15%. Consumer sentiment has hovered near record lows for some time, yet economic fundamentals like inflation, unemployment, and economic growth look solid. The disconnect is puzzling.

Economic growth is higher and inflation is lower than in 2016, when consumer sentiment was almost double what it is today. 2011's economic growth was around half and unemployment was around double that of 2025, yet consumer sentiment was much higher. In 1970, 1982, 1990 and 2007, economic growth and inflation and unemployment were all substantially worse than today, yet consumer sentiment was substantially better.

Americans have seen worse economies than today's and liked them. Why are they so unhappy?

The answer lies not in how Americans are doing relative to past decades, but in how they are doing relative to recently.

From 2019 to 2023, the latest year for which data are available, the median consumer's after-tax income rose more than 25% -- from $53,000 to nearly $67,000. Over the same period, prices rose 20%. That left the median consumer with 5% more purchasing power in 2023 than in 2019. Meanwhile, the purchasing power of the poorest consumers rose 11% and that of the richest rose 1%.

Versus 2019, almost everyone is better off, yet people are unhappy.

It turns out that it's understandable, and the reason is how we dealt with COVID.

First, the COVID stimulus overstimulated -- both economically and psychologically. When the government began sending out stimulus checks, people's finances changed abruptly. The poorest 20% of consumers -- accustomed to purchasing power gains of about a third of a percent per year -- saw an increase of more than 20% in a single year. That's a half century's worth of growth in a matter of months. The middle class, which had endured a decade long stagnation, suddenly experienced an 8% jump in purchasing power.

Stimulus checks raised the standards of living of most Americans overnight, and that's not the end of it.

In addition to the checks, the federal government prohibited landlords from evicting those who didn't pay their rent and told young people they could stop paying on their student loans.

People liked it. A lot.

The problem is that none of it was real. We were cutting checks we couldn't afford and granting payment forbearance that wasn't sustainable.

And when the stimulus checks stopped and people had to resume paying their rent and student loans, it hurt.

After enjoying a sudden 20% jump in purchasing power in 2020, the poorest Americans got hit with a 5% cut in 2022 and another 5% cut in 2023. Similarly, middle class purchasing power spiked 8% in 2020, held through 2021, then fell 4% in 2022.

A large share of today's economic dissatisfaction reflects the fact that the COVID stimulus gave people enough of a taste of better living to get them hooked -- then took it away.

Then came the inflation of 2022, itself a consequence of the stimulus. To help pay for all those stimulus checks we couldn't afford, the Federal Reserve allowed the money supply to expand. That contributed to the 2022 inflation, which made everything more expensive.

When the Fed recognized what was happening, it slammed on the monetary brakes to rein in the inflation. But hard-braking raises interest rates, and the elevated rates produced the second source of discontent: increased mortgage payments. Today, the median monthly mortgage payment on a newly purchased home is over a thousand dollars more than in 2019. People point to housing prices as the culprit, but that's not the major problem. Of that thousand dollar increase, only $375 is due to housing prices. And even there, regular pre COVID inflation would have contributed $200. Compared to normal background inflation, housing prices are only responsible for adding about $175 to new mortgage payments. The rest is due to mortgage rates almost doubling since 2019.

The COVID stimulus raised our standards of living. We helped pay for the stimulus by expanding the money supply, and that sparked runaway inflation. We fought the inflation by raising interest rates, and that made mortgages unaffordable.

People are angry because in 2020 and 2021, the government threw a massive party then stuck us with the bill.

The fundamentals say the economy is solid. Consumers say it feels bad. Both can be true at the same time.

This is Antony Davies for the Economic and Market Watch podcast. Thank you for listening. Remember to download this week's Economic and Market Watch intelligence brief and dashboard, and send us email at economicresearch@nrucfc.coop.

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