THE GREAT DECOUPLING: MACROECONOMIC PERCEPTIONS, REAL WAGES, AND COVID-19 *

Abstract

The American public's view of the macroeconomy has changed dramatically in recent years, in seemingly-perplexing ways. To document this phenomenon and better understand it, this paper analyzes forty-seven years of surveys on the state of the U.S. economy. This phenomenon is best understood as a persistent sense that the change in economic conditions is somewhat worse than expected. This is partly attributable to stagnant nominal wages despite high inflation and low unemployment, which reduced the purchasing power the economy delivered to households. A longterm decline in U.S. wage cyclicality has made unemployment a weak determinant of economic sentiment.

Keywords: economic sentiment, consumer perceptions, economic surveys, macroeconomic conditions JEL Codes: E32, E27, E01

JEL Classification: E32, E27, E01