Economic Confidence Doesn’t Match the Strong Economy. Work Life Helps Explain It

About the author: Aaron Terrazas is chief economist at Glassdoor.

Economic confidence is starting to turn a corner, but Americans are still in a much more dour mood than they should be. Friday’s jobs report showed a surprisingly strong gain of 275,000 to payrolls in February and real wage gains holding strong at 4.3%. That illustrates a remarkably resilient labor market. Inflation is slowing, and the prospect of lower interest rates is on the horizon. In other words, the hard data suggest few obvious reasons for anything but unbridled optimism about the U.S. economy.

So, what’s driving this “vibecession”?

Economists and policy makers have been quick to dismiss sagging confidence numbers over the past year. They’ve characterized them as fuzzy, unquantifiable feelings biased by postpandemic trauma, widening political polarization, and consumers’ overanchoring on recent inflation in high frequency purchases like groceries and gasoline. 

Biases surely exist in how Americans respond to confidence surveys, but it’s a mistake to be entirely dismissive of soft sentiment numbers.

Advertisement – Scroll to Continue

Confidence in and expectations about the economy are not formed in isolation, nor are they strictly shaped at the grocery check-out or the gas pump. They are informed by the voices that dominate our day-to-day lives, and they are sharpened in conversation with our communities. They are the outcome of social exchange. 

For many American adults, what we do for work and where we work dominate those conversations. Work is an unavoidably prominent part of most American adults’ lives, and how we feel about work spills over more broadly to how we feel about the economy, and about the future. 

Too many recent discussions about economic confidence overlook the workplace as a central transmission channel for economic sentiment. Glassdoor’s data suggests that, while hiring remains on stable footing, deep within many Americans’ work lives there have been two important shifts. These changes validate the economic ennui many Americans are reporting to pollsters.

Advertisement – Scroll to Continue

The first workplace transmission channel is trickle-down pessimism. 

When asked about the six-month business outlook for the company that employs them, fewer and fewer American workers are voicing optimism. In particular, the share of mid-level employees who report a positive outlook for their employer is just 48%, an all-time low going back to 2016, according to February’s Glassdoor Employee Confidence Index. 

It’s possible that these corporate insiders know something generalist economy watchers don’t, but more likely the pessimism reflects the sentiment they are hearing in company communications and meetings. 

Advertisement – Scroll to Continue

Tellingly, the outlook among the senior-most employees began to dip decisively in early 2022, three quarters prior to the downturn in sentiment among more junior employees. The six-month-ahead business outlook among director-plus employees peaked in the first quarter of 2022. The share reporting a positive business outlook had declined by about five percentage points by the end of the year. Over the same period, the outlook was on average flat among entry-level employees in the GECI. 

Amid higher capital costs and inflation pressures, fear for the future was natural and justified as interest rates began to rise. It’s also natural for early-career employees to internalize the messages their managers and company leaders are communicating. Increased demands for workplace transparency have forced executives to be more open about their own fears and uncertainties. Open discussion of the knowns and unknowns is certainly preferable to performative bravado, but it is not without its own risks.

The second workplace transmission channel is eroding job quality. 

Advertisement – Scroll to Continue

Real wage gains have turned positive as consumer price inflation has slowed, but there’s an important omission in the data. No official measure of real wages attempts to control for job quality—a statistical control that is common when measuring the prices of consumer goods and services. For instance, most people recognize that there are two ways an airline can make our travel more or less pleasant: They can increase the price of a ticket, or they can scrimp on the quality of the trip through cuts like removing a beverage service or reducing legroom. In other words, there can be adjustments to price, or to quality.

Similar to the “shrinkflation” phenomenon we so often see in consumer goods, Glassdoor data on employee sentiment around work-life balance and career growth prospects suggests that there has been some erosion in job quality over the past year—perhaps driven by return-to-office and productivity efforts. We see this primarily in a handful of skilled occupations, where workers are accustomed to substantial autonomy and career opportunity in their work-lives. Those include business intelligence engineers (average work-life balance rating on Glassdoor -0.4 percentage points from 2022 to 2023), machine learning scientists (-0.3 percentage points), and software engineers (-0.2 percentage points). 

The exceptionally tight jobs market of 2021 and 2022 set a new baseline of what “good” feels like for a generation of workers. What labor economists see as a renormalization to prepandemic norms feels like a loss of relative status for many workers.

Medical professionals used to routinely dismiss fuzzy feelings like pain and anxiety as ailments of the mind without any basis in objective reality. In recent years, the cutting edge of medicine has learned to embrace these quantitatively amorphous concepts as real phenomena. Economists would be wise to follow suit.

Feelings may be fuzzy, but they’re no less consequential for our physical and economic well being than the standard battery of statistical canaries. They merit our serious consideration rather than our professional gaslighting.

Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to

You may also like...