Why do Americans feel gloomy about the economy despite falling inflation, low unemployment?

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Inflation has reached its lowest point in 2 1/2 years. The unemployment rate has stayed below 4% for the longest stretch since the 1960s. And the U.S. economy has repeatedly defied predictions of a coming recession. Yet according to a raft of polls and surveys, most Americans hold a glum view of the economy.

The disparity has led to befuddlement, exasperation and curiosity on social media and in opinion columns.

Last week, the government reported that consumer prices didn’t rise at all from September to October, the latest sign that inflation is steadily cooling from the heights of last year. A separate report showed that while Americans slowed their retail purchases in October from the previous month’s brisk pace, they’re still spending enough to drive economic growth.

Even so, according to a poll last month by The Associated Press-NORC Center for Public Affairs Research, about three-quarters of respondents described the economy as poor.

The disparity between the data and individual perceptions poses a political challenge for President Joe Biden as he gears up for his re-election campaign. Polls consistently show that most Americans disapprove of Biden’s handling of the economy.

Many factors lie behind the disconnect, but economists increasingly point to one in particular: The lingering financial and psychological effects of the worst bout of inflation in four decades. Inflation may be slowing, but many goods and services are still far pricier than they were just three years ago

Lisa Cook, a member of the Federal Reserve’s Board of Governors, captured this dynamic in recent remarks at Duke University.

“Most Americans,” Cook said, “are not just looking for disinflation” — a slowdown in price increases. “They’re looking for deflation. They want these prices to be back where they were before the pandemic. … I hear that from my family.”

That’s particularly true for some of the goods and services that Americans pay for most frequently: Bread, beef and other groceries, apartment rents and utilities. Every week or month, consumers are reminded of how far those prices have risen.

Deflation — a widespread drop in prices — typically makes people and companies reluctant to spend and therefore isn’t desirable. Instead, economists say, the goal is for wages to rise faster than prices so that consumers still come out ahead.

How inflation-adjusted incomes have fared since the pandemic is a complicated question, because it is difficult for just one metric to capture the experiences of roughly 160 million Americans.

Adjusted for inflation, median weekly earnings — those in the middle of the income distribution — have risen at just a 0.2% annual rate from the final three months of 2019 through the second quarter of this year, according to calculations by Wendy Edelberg, a senior fellow at the Brookings Institution. That meager gain has likely left many Americans feeling that they have made little financial progress.

For Katherine Charles, a 40-year old single mother in Tampa, Florida, inflation’s slowdown hasn’t made it easier to make ends meet. Her rent jumped 15% in May. Over the summer, to keep her electricity bill down, Charles kept the air conditioning off during the day despite Tampa’s blistering hot weather .

She has felt the need to cut back on groceries, even though, she said, her 16-year old son and 10-year old daughter “are at the age they are eating everything in front of them.”

Charles, a call center representative with a company that handles customer service for the Medicare and Affordable Care Act health plans, received a raise to $18.21 an hour two years ago. But it wasn’t much of an increase. She doesn’t even remember how large it was.

Other factors also play a role in why many people are still unhappy with the economy. Political partisanship is one of them. With Biden occupying the White House, Republicans are far more likely than Democrats to characterize the economy as poor, according to the University of Michigan’s monthly survey of consumer sentiment.

Karen Dynan, a Harvard economist who served in both the George W. Bush and Obama administrations, noted that distinct swings in economic sentiment occur after a new president is inaugurated, with voters from the party opposed to the president quickly switching to a more negative view.

“The partisan divide is stronger than it was before,” she said. “Partly because the country is more polarized.”

At the same time, broad national data doesn’t capture the experiences of millions of everyday Americans, many of whom haven’t seen their wages keep up with prices.

“In real terms, most people are probably pretty close to where they were pre-pandemic,” said Brad Hershbein, a senior economist at the Upjohn Institute. “But there are a lot of exceptions.”

Lower-income Americans, for example, have generally received the largest percentage wage gains since the pandemic. Fierce competition for front-line workers at restaurants, hotels, retailers and entertainment venues forced companies to provide significant pay hikes.

But poorer people typically face a higher inflation rate, according to economic research, because they spend a greater proportion of their income on such volatile expenses as food, gas and rent — items that have absorbed some of the biggest price spikes.

Even for people whose incomes have kept pace with prices, research has long found that people hate inflation more intently than its economic impact would suggest. Most people do not expect their pay to keep up with rising prices. Even if it does, the higher pay may come with a time lag.