Can You Feel It? By: Gabriel PotterMBA, AIFA® 2014.12.17

Despite several years of economic recovery, the Democrats knew their key constituents, the working classes, weren’t particularly enriched by the improving economic environment during the 2012 presidential election cycle.  Former President Bill Clinton acknowledged the incongruity and endorsed the re-election of Barack Obama during his speech at the 2012 Democrat National Convention:

“A lot of Americans are still angry and frustrated about this economy. If you look at the numbers, you know employment is growing, banks are beginning to lend again. And in a lot of places, housing prices are even beginning to pick up. But too many people do not feel it yet.

I had the same thing happen in 1994 and early ‘95. We could see that the policies were working, that the economy was growing. But most people didn’t feel it yet. Thankfully, by 1996 the economy was roaring, everybody felt it… The difference this time is …President Obama started with a much weaker economy … He [President Obama] has laid the foundation for a new, modern, successful economy of shared prosperity. And if you will renew the president’s contract, you will feel it. You will feel it.” 

It’s an important question, especially politically:  how do you get Americans to appreciate, or even acknowledge, the recovery?  More than 70% of Americans think we’re in a recession despite record-breaking profits and solid recoveries across many sectors of the economy.

There are a lot of reasons why Americans are so pessimistic, despite looking good on paper, particularly against our peers.  For starters, the equity recovery of the past 5 years has been great for the investing class:  upper class Americans who can afford to put aside some of their wealth in capital markets.  Conversely, CNN reports that 76% of Americans live paycheck to paycheck, without substantial investments or savings. For them, the movement of the stock markets is largely irrelevant.  The most pressing questions for lower to middle class income bracket Americans are:  “do I have a job?”, “how much does it pay?”, and “what can I afford to pay for next?”  It’s true unemployment has steadily improved over the past five years – and that’s positive – but simply having a stagnant wage job doesn’t always feel rewarding.

That’s why price drop in gasoline is so important.  Lower wage earners pay, proportionally, more of their paycheck towards essential living staples, like transportation costs.  Saving $10 on a tank of gasoline or more on monthly heating bills can have a measurable impact you can really feel. Based on improvement in wages and better gasoline prices, Thompson Reuters reports an 8 year high on US consumer sentiment.  In other words, low energy prices is an advantage most of us can really feel. 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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