Nearly three years after the official end of the Great Recession, the American economy is starting to show, at long last, some “moderate” improvement as the nation heads into a presidential election campaign in which the economy is likely to be a central issue. Yet some parts of the macroeconomy are more improved than others. Housing prices, for example, after having fallen more than 30% (or more, in certain hard-hit areas) off their 2006 peak, have yet to bottom out and it may be years before any significant price appreciation returns. The labor market, while evincing recently some signs of strength (though perhaps induced by better-than-typical weather conditions), is still anemic, and the employment-to-population ratio, which is considered by many to be a better barometer of labor market conditions, is still at historic lows. The U.S. stock market, on the other hand, recent wobbles notwithstanding, has been buoyed by rebounding profits in the corporate sector and unconventional monetary policy. However, it is unclear whether the Fed will engage in any more rounds of quantitative easing, and U.S. financial markets remain vulnerable to the European debt crisis.
American households are buffeted by these macroeconomic forces to different degrees, and when conditions in these various spheres diverge, as in the aftermath of the Great Recession, groups that are differentially affected may respond politically in ways that generate new lines of cleavage that add complexity to our traditional economic voting models. Using monthly survey data from the Michigan Survey of Consumers over the period 1992 to 2011, we examine the impact of unemployment, inflation, house and stock prices, and real income growth on people’s retrospective assessments of family financial well-being. Our innovation is to compare the effects of these variables for different groups of households defined by their asset-holding status: investors (directly or indirectly) in the stock market, homeowners without risky financial assets, and renters. We indeed find that people respond to aggregate economic conditions in heterogeneous ways. In particular, investors’ well-being is directly tied to movements in stock prices and is unresponsive to short-term fluctuations in the labor market. Homeowners and renters, on the other hand, are strongly affected by shocks to unemployment, with homeowners additionally showing sensitivity to trends in house prices. Interestingly, and contrary to several economic forecasting models, real income growth does not significantly influence any of these groups, a null result that we attribute to the fact that over the time period we study, the benefits of economic growth have accrued mostly to a very small segment of public. We conclude that economic voting models in use by political scientists need to be move beyond their traditional focus on growth, inflation, and unemployment to consider newer sources of economic vulnerability and their effects on political behavior and electoral choice.