From AOL:
… I think the average Americans, they are hearing a lot from media coverage. And I will tell you that affordability has two components, there is inflation, and then there is real incomes. Real incomes are up about 1% and what we’re not going to do is say that Americans don’t know what they’re feeling. We’ve been working on it every day. I was on your show on March talking about affordability. The- we’ve made a lot of gains, but remember, we’ve got this embedded inflation from the Biden years, where mainstream media, whether it’s Greg Ip at the Wall Street Journal, toxic Paul Krugman at New York Times or former Vice Chair, Alan Blinder, all said it was a vibecession.
In some sense, I agree with the proposition that the level of consumer discontent, as measured by the U.Michigan Sentiment index or the Conference Board Confidence index, seems disconnected from aggregate economic activity. And, in general, median usual weekly earnings are up (slightly) relative to inflation:
Figure 1: Real median weekly earnings, deflated by CPI-all (blue), by CPI-wage earners & clerical workers (tan) by CPI second quintile (green), and by AIER Everyday Price Index (AIER EPI) (red), all in logs, 2024Q4=0. 2025 Second quintile CPI extrapolated using regression first differences CPI 2023-24. Source: BLS via FRED, BLS, AIER, and author’s calculations.
The American Institute for Economic Research Everday Price Index (EPI™) suggests that real earnings are 0.6% below 2024Q4 levels.
On the other hand, it’s not just the absolute level of income that matters; so too does the deviation from expectations. While we don’t have a direct measure of what people expected in 2025, we know what the trend growth rate was over the 2023-24 period.
Figure 2: Real median weekly earnings, deflated by CPI-all (blue, eft log scale), 2023-24 stochastic trend (gray), and U.Michigan Consumer Sentiment (green, right scale). Source: BLS via FRED, U.Michigan Survey of Consumers, and author’s calculations.
It’s also the case the economic policy uncertainty likely weighs on sentiment, and this the Administration has much to answer for.
Figure 3: U.Michigan Consumer Sentiment (black, left scale), EPU (news) (blue, right scale). Source: U.Mich. via FRED, policyuncertainty.com.
So, yes real median weekly earnings are up (in Q3, up 0.4% relative to 2024Q4), but presumably below expectations, accompanied by lots of uncertainty (In a world with risk averse agents, a wider distribution of states of nature will reduce welfare).
