Newswise — In this episode of the Business and Society podcast, three professors from the Ross School of Business discuss notable trends from 2023 and the current challenges of 2024 from an economic, behavioral, and political perspective. The major topic of discussion is the friction between the real economy – lowering interest rates, low unemployment rates, and inflation reduction – and consumers perceived experience. The panel shares insights on the discord around the economy and what it means coming into an election year.
Sarah Miller, associate professor of business economics and public policy, shared that the “soft landing” the government was hoping for post-pandemic was clearly achieved. She explored that labor market improvements due to labor actions were critical in maintaining economic stability amid the gradual deceleration of inflation. Strikingly, inflation sank to nearly a third of its 2022 levels. However, despite indicators suggesting a flourishing economy, many Americans, particularly Generation Z and Millenials, expressed dissatisfaction.
Marcus Collins, clinical assistant professor of marketing, suggested that one reason for the current difference between the perception and reality of economic prosperity is the rise of tribalism, a trend that usurped the traditional rules of market dynamics. Over the past few years, experts have seen the creation of a “vibe economy,” in which communal beliefs have become the driving force behind consumer decision-making and sentiment. In the case of 2023 and the beginning of 2024, shared challenges have led to increasing narratives of dissatisfaction.
“We saw that the economy is empirically doing well on all measures,” said Collins, “people still say, ‘I didn't feel it.’ It didn't feel that way because of the discourse around their people. If we're getting our news from social settings like Instagram and TikTok, then what my people feel is probably going to have a sway on what I feel because these things aren't empirical. They are, by nature, subjective.”
Erik Gordon, clinical assistant professor of entrepreneurship and strategy, builds on this disconnect by sharing that the most recent Michigan Ross Financial Times polling suggests that inflation has usurped job loss as the primary concern among voters across the political spectrum. This shift raises questions about the accuracy of the Consumer Price Index. While the CPI points to a slowing inflation rate, still slightly above target but vastly improved, consumers' lived experience differs dramatically.
“Do you need a new CPI?” questioned Gordon. “Customers see inflation through the lens of their own lives. So they see it through their visit to the grocery store, their visit to the gas station, or the drug store. When you say to somebody, ‘But the CPI number says this,’ they just look at you and say, ‘Well, I don't care what the CPI number says. All I can say is inflation is up.’ We see this in the FT-Poll, and inflation is not up, prices are up. And are they conflating inflation with price level? The price level is not what the price level was two years ago or five years ago. But if they think that prices have to go down before we've conquered inflation, they're gonna wait a long time.”
From brand marketing to political media narrative, the conflict between economic reality and perception will be particularly impactful in 2024. As of now, the economy and inflation are a top priority for voters. As the panel explores, President Biden's handling of the economy is under fire from both parties, and if the administration wants to get back into voters’ good graces, they need to improve their narrative strategy to better represent their achievements.
To close the conversation, the three panelists explore how they are implementing the trends of 2023 and their expectations for 2024 in the classroom. Collins emphasizes the need for understanding various points of view, urging students to regard brands through others’ lenses, thereby getting insights into different cultural perceptions. Miller encourages students to find patterns and derive meaning from data— a crucial skill in today's data-driven economy. Gordon advocates for the multidisciplinary nature of entrepreneurship, suggesting students view life as a vast series of entrepreneurial opportunities, especially during challenging times. Combined, they all create a unique perspective for business leaders to view the trends of 2023 and expectations for 2024.
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