As President Biden struggles to sell Bidenomics to skeptical voters, he is confronted with the all-to

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-real consequences of persistently higher inflation, but it also fights against human psychology.

And both factors may be especially strong in California.

Most economists agree that the US economy has made a remarkable recovery from the pandemic during Biden’s presidency. And the country continues to exceed expectations, even if California isn’t doing so well. But polls consistently show that the public generally has a negative view of the economy and, by extension, Biden’s handling of it.

While partisan politics, a pandemic hangover and other factors have colored people’s attitudes, experts say inflation appears to be the biggest economic albatross for Biden.

He took office with an approval rating of 57%, but in the last Gallup poll in March that number was 40%, with his handling of the economy

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as one of his greatest weaknesses.

This is even as inflation has fallen significantly from previous highs and Americans’ incomes have risen on average to equal or often exceed higher costs for most goods and services.

On Wednesday, the government reported that inflation, measured by US consumer prices, rose to 3.5% in March from a year ago. Profit was slightly higher than expected, partly due to larger price increases for transportation, electricity and medical services. Food inflation has been moderate, but shelter and energy prices are still slightly too high

While the inflation rate has fallen since hitting a 40-year high of 9.1% in June 2022, it is still well above the Federal Reserve’s target of 2%, which could delay a long-awaited rate cut.

Moreover, experts say the slowdown in inflation is not what most people are noticing. Nor do they seem as relieved by the apparently encouraging decline in inflation from 2022 as professional economists are. After all, it’s not that prices have dropped dramatically; they just aren’t rising as quickly as before.

That’s where basic elements of human nature come in, some economists and other analysts say: Consumers instinctively pay more attention to the dollars they have to spend.

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than they do with the increases in their paychecks.

That’s especially true if the purchases involve everyday items like gasoline, which are subject to California prices

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higher than elsewhere in the United States.

The U.S. Bureau of Labor Statistics reported Wednesday.

Rents are more than 20% higher than before the pandemic, and electricity costs are about 30% higher.

For Californians, even if wage increases equal or exceed consumer price increases, higher inflation can have an even stronger real and psychological impact because the state is so much more expensive to begin with.

They worry about whether inflation will come back, said Mark Baldassare, statewide research director at the Public Policy Institute of California. It creates a new set of circumstances and fears in California, where housing and the cost of living are a major concern, especially for lower-income earners, but also for middle-income and younger Californians.

In a national survey he conducted last fall, Baldassare found that a growing percentage of Californians were not too happy (26% compared to 20% in 2011 and 13% in 1998). And among the groups least happy: 18 to 34 year olds; tenants; and those with a household income of $40,000 or less.

Nationally, prices for all goods and services have risen by about 20% over the past four years. And it was a particularly incipient shock for many consumers, because the vast majority of them had never experienced anything like this in their adult lives.

The last time inflation was at or near double digits was the early 1980s, and for most of the past thirty years inflation has been close to the Federal Reserve’s 2% target.

Part of the story is not only that we’ve had high inflation, but that we’ve had high inflation with a generation ill-equipped to deal with it, says Justin Wolfers, professor of public policy and economics at the University of Michigan. Young people today might think that prices have gone up 20% and that no one will ever make me healthy.

But in fact, Wolfers noted, increases in wages and salaries have on average exceeded inflation since the pandemic, with lower-income workers seeing the highest percentage gains.

Older people who have experienced significant inflation before may have learned that

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usual

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It appears to be a temporary problem: At least over the past half century, as the cost of living has risen sharply, so have workers’ incomes, albeit not immediately.

Older generations understand the dynamic: “Inflation takes away with higher prices and gives back with higher wages,” Wolfers said.

In California, workers earned an average of $1,595 per week in the third quarter of 2023, the latest available data from BLS shows. That is 23% higher than in the same quarter of 2019.

And it’s about five percentage points higher than the price increase over a similar period in California, based on data from the U.S. Treasury Department.

But while average salaries now match or exceed price increases, meaning the purchasing power of most consumers has not been eroded, Wolfers and other economists say that’s not the way people process things.

When prices rise sharply, people get upset, think it is unfair and unjust and look to the government or someone else to blame. But when their wages rise by the same amount, people tend to externalize the increase because they feel they have earned it, even though in reality the larger paycheck is largely the result of higher prices and the resulting ability of employers to pay employees more.

That psychology poses a major challenge for Biden, because it takes time for consumers to overcome their internalization of high inflation. And while California is unlikely to play a role in November’s presidential election, the gloomy mood of many residents due to inflation could only be exacerbated as the state’s economy lags behind the nation’s.

Between February 2020 and February 2024, California payrolls increased by 1.7%, half of the

nationalities

employment growth rate. California’s unemployment rate was 5.3% in February, compared to 3.9% for the US as a whole.

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The state Treasury Department’s chief economist, Somjita Mitra, said the share of long-term unemployed people in California is relatively much smaller.

The Conference Board’s latest consumer confidence survey shows that California is significantly behind other major states such as Florida, Texas and New York.

And there are new signs that more California consumers are struggling financially. For example, the share of delinquent payments on credit cards rose in December to the highest level since late 2009, around the time of the Great Recession, according to UC Berkeley’s California Policy Lab.

In California, credit trends are worsening; “They are not going in the right direction,” said Executive Director Evan White.

Household surveys by the Census Bureau, most recently in February and March, found that Californians are struggling more with housing finances and paying typical living expenses than the national average. And a significantly higher share of Californians than most other states reported to the census that they had changed their driving habits because of the cost of gas.

According to the U.S. Energy Information Administration, gasoline prices in both the U.S. and California have increased by about 29% since February 2020. But the average price for a gallon of gasoline in California last month was $4.83, compared to the national average of $3.45.

Gas prices have risen again in recent weeks, and if they continue, this could be another major drag for Biden, said Mark Zandi, chief economist at Moodys Analytics.

The other major economic factor that Zandi said could sway some voters is whether interest rates will fall.

For homeowners, higher inflation has also meant higher house prices. But renters, especially those in their prime home-buying years, between their 30s and 40s, felt left out of the market because of high inflation and mortgage rates, especially in expensive California.

That really undermines their thinking about the economy and their own financial health, Zandi said.