Americans no longer judge the economy by the unemployment rate, new paper finds

Up until 2020, Americans' view of the economy was deeply connected to the unemployment rate. The pandemic weakened that tie, finds a new working paper.

Why it matters: The paper, titled "The Great Decoupling" sheds light on a vibe that many are puzzling over but isn't yet well understood: Why are people so unhappy with the economy — despite the low unemployment rate.

• Lately, the blame's landed on record-high inflation. But this paper complicates that view.

Backstory: Prior to 2020, any time the unemployment rate went up, Americans would grow more pessimistic about the economy. When the rate fell, and more people got jobs, we'd get more positive.

• Those were the findings of a 2014 paper, published by Darren Grant, an economist at Sam Houston State University.
• He compiled data from surveys of Americans' perceptions of the economy, dating back to the 1970s, and then examined how those polls connected with indicators like unemployment and inflation.

These surveys were in sync with those indicators — even predictive of later revisions to government numbers. "Consumer perceptions have been quite sensible over the years," Grant tells Axios.

What's new: Grant updated his research this year — bringing his massive spreadsheet up to date — to see if anything had changed. It had.

• "The public really isn't taking unemployment into account nearly like they used to," he says.

What's next: Grant's research doesn't definitively explain why this happened, but he hypothesizes that the massive amount of cash the federal government sent out to Americans to alleviate the COVID economic shutdown played a big role.

• When the jobless rate was very high in 2020, families felt a bit more positive about the economy than would previously have been typical. At the time, they were getting unprecedented levels of money in enhanced unemployment and stimulus checks.
• That disconnect seems to have shaken something loose in the way Americans view the state of the economy, he says.

The bottom line: It's not surprising that those transfers would "somewhat decouple" economic sentiment from macroeconomic conditions, Grant writes.

• "The greater surprise," he writes, "is the ferocity of the decoupling, which is very large in historical terms and, as of this writing, still ongoing."