The Sensitivity of Economic Sentiment to Partisan Affiliation

One of the puzzles of current times is why overall assessments of the economy have not risen in accord with actual developments (say, as summarized by the Misery Index), and relatedly why those gains have not redounded to the incumbent president’s approval ratings (discussion here). I don’t have answers, but I have some observations.

Economic Conditions and (Measured) Economic Sentiment

First, how much as the current reading of the Michigan Index of Economic Sentiment (FRED series UMCSENT) deviated from what is expected over the past 30 years? Pictured in Figure 1 is the actual UMCSENT series (red), the fitted series (green), and residuals (blue).

Figure 1: Actual, fitted, and residual for UMCSENT regression.

The regression (used in my previous post on this subject) is (gasoline price is CPI deflated):

UMCSENT = 44.26 – 4.06MISERY – 16.4pgasoline

Adj-R2 = 0.61, SER = 8.30, DW = 0.28, Nobs = 379, sample 1992M01-2023.07. Bold Italics denotes significance at 10% msl, using HAC robust standard errors.

(I have used Bloomberg consensus for July unemployment rate, and Cleveland Fed 8/1 nowcast for July CPI.)

Carola Binder has an excellent discussion of partisan effects in sentiment, current and expectations. Here, I focus on the differential impacts of Misery Index components (the unemployment rate and the y/y CPI inflation rate) on the disaggregated sentiment indexes. First, here’s a picture of the different series.

Figure 2: University of Michigan Index of Economic Sentiment (bold black), for Democrats (blue), for Independents (chartreuse), for Republicans (red). NBER defined peak-to-trough recession dates shaded gray. Source: University of Michigan via FRED, University of Michigan, NBER.

Note that the Republican view is much more positive negative than Republicans during the Trump administration, but switched to much more negative during the Biden. This is a reflection of the well known tendency for sentiment to be much higher than otherwise when the president is a member of the respondent’s party. It would be nice to see if this effect is stronger in more recent times than previous decades, but a fairly continuous time series is not available before 2006, so it’s hard to answer this question.

As of July, Republicans have a 51 reading, while Democrats have a 92 reading.

How different to Democrats, Independents and Republicans view economic conditions based on realizations of unemployment and inflation? I investigate this question by regressing various UMCSENT measures on these variables as well as a dummy variable for a Democratic president.

UMCSENTit = α0 + α1Ut + α2πt + α3DEMPRESt

Where i = overall, Democrat, Independent, Republican, 2006M01-2023M07. UMCSENT is divided by 100, Ut and πare in decimal form. Table 1 presents the results.

Notes: Bold face denotes significance at 10% msl using HAC robust standard errors. F-test (p-value) is p-value for restriction that coefficients on unemployment and inflation are the same.

Column 1 shows the results for the UMCSENT (overall) drawn from FRED. The unemployment rate and inflation rate show up with about the same sized coefficient. Democratic presidential administrations show up with a negative coefficient: a Democratic president is associated with a 0.05 reduction in UMCSENT (mean of normalized index is 0.86). If one restricts the sample to the same period for which we have the disaggregated results (column 2), then results are largely the same; hence the period for which we have the disaggregate data does not appear to be anomalous.

Democrats appear to place slightly lower weight on inflation than on unemployment — but not a statistically significantly lower. In contrast, Republicans place significantly higher weight on inflation than on unemployment (the F-test nearly rejects the null of equal coefficients).

The coefficient on the dummy variable confirms the finding that views on the economic state are more positive when the presidency is held by someone of the same political party/affiliation: the coefficient on DEMPRES is positive for Dem (+0.191), and negative for Rep (-0.361), and slightly less negative for Ind (suggesting that Ind are more like Rep than Dem). Generally, the standardized coefficients (“beta” coefficients) indicate largest impacts are associated with the dummy variable.

There is an asymmetry in the impact of presidential party affiliation. During this period (2006-2013), Republicans have an outsized impact of presidential affiliation — 0.361 vs. 0.191 (in absolute value). Ceteris paribus, they really view conditions negatively when a Democrat holds the presidency.

Interestingly, while both Ind and Rep sentiment depends on the unemployment and inflation rates (Adj R2 around 0.5), Dem sentiment is largely unexplained (Adj R2 around 0.04). The y/y growth rate of the real S&P500 seems to have a much larger impact (as measured by the “beta” coefficient) for Dem than for Rep or Ind.


(Measured) Economic Sentiment and Biden Approval

A commonplace refrain is that Biden is not getting credit for the strong performance of the economy. This point is verified by inspecting Biden’s approval rate trend (from FiveThirtyEight) and the sentiment indexes.

Figure 3: University of Michigan Index of Economic Sentiment (bold black, left scale), for Democrats (blue, left scale), for Independents (chartreuse, left scale), for Republicans (red, left scale), Biden Approval Trend, % (light green, right scale). Source: University of Michigan via FRED, University of Michigan, FiveThirtyEight.

Using the relationship between UMCSENT and Biden approval over the 2021M11-2023M07 period, the July Biden approval rate should be 43.1, as opposed to the 538 trend value of 40.5.




45 thoughts on “The Sensitivity of Economic Sentiment to Partisan Affiliation

  1. ltr

    The Sensitivity of Economic Sentiment to Partisan Affiliation

    [ The matter seems simple enough. There has been an increasingly fierce demand by Democrats and Republicans for uniformity and conformity in expressed political-economic sentiment. ]

    1. Macroduck

      Ah, the bland, namby-pamby “both sides do it” position. Naturally, ltr blames both parties, because her goal is serving the agenda of the CCP, not truth.

      Newt Gingrich centralized control of Republican party money. That centralization of money centralized power and allowed party leaders to dictate the political agenda. Democrats did not have a similarly narrow, top- down structure. More recently, Trump has wrested financial control from the GOP, funneling money to candidates after collecting vig. PACs have done the same. One result is that state GOP party mechanisms are having a hard time raising money:

      Bernie Sanders, Elizabeth Warren and the Squad, on the other hand, are able to stake out their own policy positions withingthe Democratic Party. There is a progressive wing in the Democratic Party which wins so.e policy debates, but not all.

      The two parties really aren’t mirror images. It’s either dishonest or ignorant to claim that they are.

  2. ltr

    June 27, 2023

    Caught in the crossfire: Fears of Chinese–American scientists
    By Yu Xie, Xihong Lin, Ju Li and Junming Huang


    Our study reveals the widespread fear among scientists of Chinese descent in the United States arising from conducting routine research and academic activities. If this fear is not alleviated, there are significant risks of underutilization of scientific talent as well as losing scientific talent to China and other countries. Addressing the fear of US-based scientists of Chinese descent and making the American academic environment welcoming and attractive to all will help retain and attract scientific talent and strengthen the US global leadership in science and technology in the long run.


    The US global leadership in science and technology has greatly benefitted from immigrants from other countries, most notably from China in the recent decades. However, feeling the pressure of potential federal investigations since the 2018 launch of the China Initiative, scientists of Chinese descent in the United States now face higher incentives to leave the United States and lower incentives to apply for federal grants. Analyzing data pertaining to institutional affiliations of more than 200 million scientific papers, we find a steady increase in the return migration of scientists of Chinese descent from the United States to China. We also conducted a survey of scientists of Chinese descent employed by US universities in tenured or tenure-track positions (n = 1,304), with results revealing general feelings of fear and anxiety that lead them to consider leaving the United States and/or stop applying for federal grants. If the situation is not corrected, American science will likely suffer the loss of scientific talent to China and other countries.

  3. ltr

    June 27, 2023

    Caught in the crossfire: Fears of Chinese–American scientists
    By Yu Xie, Xihong Lin, Ju Li and Junming Huang

    Psychological Indicators *

    1) Thirty-five percent of respondents feel unwelcome in the United States
    2) Seventy-two percent do not feel safe as an academic researcher
    3) Forty-two percent are fearful of conducting research
    4) Sixty-five percent are worried about collaborations with China
    5) Eighty-six percent perceive that it is harder to recruit top international students now compared to 5 years ago


    1. Macroduck

      You’ve posted this before. Other commenters have responded. You’ve ignored their responses. Ithaqua here makes the entire reasonable point that one question makes it easy to blame the U.S. for fear that is actually fear of retaliation by China’s government. China is has been exposed intimidating the Uyghur population of the UK, even though that population is only a few hundred. China set up police stations in U.S. and UK cities to intimidate expat Chinese – more realistically “thug stations”.

      ltr knows her government intimidates, enslaves and tortures. She tries to claim moral equivalence by posting this piece of research, while obscuring the parts that incriminate China. ltr is a vicious little cur, playing at having moral concern.

    2. Macroduck

      Remember back on July 11, when ltr gloated over the storm-related deaths of Vermonters while bragging about China’s magnificent (sic) efforts to deal with weather?:

      July 11, 2023 at 11:05 am

      Here is precisely the sort of problem China has been investing in, both through a comprehensive weather satellite program and Artificial Intelligence compilation:

      July 11, 2023

      Vermont Floods Show Limits of America’s Efforts to Adapt to Climate Change…

      Well, she really messed the bed that time. Seems China wasn’t prepared for big rains, either:

      ltr has so little concern for non-Chinese that she would use their suffering as an excuse to do her “China GOOD! U.S.BAD!” routine. What a racist!

      Oh, and I realize I’ve made this point about flooding before, but since ltr is rerunning her “U.S.BAD!” comments, I figure I can repeat my stuff, too.

  4. Ivan

    I think we have moved away from reality/data determined sentiments to partisan determined sentiment. Since its inception Fox news has been keenly adhering to the idea that whatever its owners wanted to present as reality they would provide – regardless of facts. Fox now has a very self selected audience who don’t want to hear good news when a democrat is in the white house and don’t want to hear bad news when there is a GOP president. Even the lies about the result of the last presidential election was something that got promoted – and from the Dominion lawsuit we know that Tucker even demanded they fire a news person who tried to present the facts on that issue (because it could cost them viewers/money). With the economy there is not even that much of a need for outright lies. You just select, from hundreds of datasets, that which is positive or that which is negative depending on what sentiment you want to serve.

  5. Ithaqua

    One assumes you read this part too, deriving from the fact that it was an online survey:

    “A methodological caveat is in order. There are two sources of potential bias with our survey data (discussed in more detail in SI Appendix, Supplementary Materials 2): “sample selection bias” and “social desirability bias”, both in the direction of exaggeration of the negative impact of the China Initiative. Therefore, caution is needed when we interpret the results.”

    As for one, of many, statements about the relative lack of accuracy of online surveys:

    I also note that some of the responses were not entirely indicative of the U. S. being the source of the negative feelings: ““My family, friends, or collaborators might be targeted by the US or Chinese government in retaliation for something I say or do” (37%), and “Others might report what I say or do to the US or Chinese government” (31%).”

  6. Macroduck

    On a related topic, the U.S. is no longer AAA rated. With the Fitch downgrade, two of the three big rating agencies rate the U.S. government AA+. (Sorry, DBRS. You don’t count.)

    One of the reasons Fitch identified for downgrading the U.S. is a deterioration of governance over three decades. Recall that the budget surplus achieved during the Clinton Administration turned to deficits after the “self-funding” tax cuts and second Iraq War under Shrub – roughly in line with the onset of Fitch’s three decades of deterioration in governance. Also roughly coincident with the beginning of that three-decade period of deteriorating governance is the 1995 debt ceiling fight while Clinton was president, Newt Gingrich was Speaker, Bob Dole was Majority Leader.

    1. Ivan

      Not sure those ratings agencies opinions have much of any meaning since their abysmal performance on housing bonds in early 2000. Stocks barely burped.

    2. pgl

      Well DBRS is a big deal if one is a Canadian. I hear Jamie Dimon is dismissing the down grade.

  7. JohnH

    NY Times: “The first several weeks of Ukraine’s long-awaited counteroffensive have not been kind to the Ukrainian troops who were trained and armed by the United States and its allies.

    Equipped with advanced American weapons and heralded as the vanguard of a major assault, the troops became bogged down in dense Russian minefields under constant fire from artillery and helicopter gunships. Units got lost. One unit delayed a nighttime attack until dawn, losing its advantage. Another fared so badly that commanders yanked it off the battlefield altogether.”

    While similar reports have been published in other prominent media outlets, it’s especially significant when the NY Times acknowledges reality on the ground. Is this just a first step in the process of letting us down easy?

    If so, could it be déja vu all over again? In previous pointless and futile quagmires, there came a time when reality began first to intrude and then to trump the initial hubris and bravado. In Vietnam it took several years. In Iraq, it started ironically just after Bush’s infamous “Mission Accomplished” moment. In Afghanistan it happened only after 20 years of government coverup and media disinterest in what was really going on. In retrospect, the Minsk Protocol may come to be viewed as a golden opportunity spurned and sabotaged,

    1. Anonymous

      in the day, when i was on active and participating reserve status, each month the unit staff put together a statement of readiness and training (4 major issue ‘areas’ rated based on data aka ‘sort’) report which was classified and reflected the ability of the unit to perform operations and deploy.

      military capability, measured as ‘readiness’, is complex requires: broad areas; organize, equip and train.

      all the equip and all the training will not overcome problems with organization…. which is deep and goes to military ‘culture’ and doctrine. effects not built in months!

      and tempered by the opposition capabilities and geography complexity.

      ukraine has been extravagant with the temporal dimension, which is limited!

    2. Ivan

      That’s the narrative Putin want the idiots in the west to believe – it appears he has succeeded with at least one of them.

      Putin is a scholar of history and clearly is getting desperate. Maybe he is beginning to see shadows of WW1 where the end came when Germany simply didn’t have the resources to continue.

        1. Menzie Chinn Post author

          JohnH: It’s not the quoting from NYT that is indicative of you’re being a useful idiot for Putin; it’s your relentless relish at the hardships the Ukrainians are facing in light of an incursion into a sovereign nation by a country that was a signatory to the Budapest Memorandum.

          1. pgl

            One has to wonder if JohnH even knows what the Budapest Memorandum on Security Assurances even is. He decided to mansplain us over the 2014 Minsky Protocals totally obvious to the fact that Putin violated those too.

          2. JohnH

            Where exactly do I relish the hardship of Ukrainians?

            What I am pointing out is the US’ cynical, repetitive policy of getting itself involved in pointless and futile quagmires that totally disregard the destruction of the US proxy and the suffering of its people. And then, after all the destruction and suffering, the US ends up losing, walks away, and washes its hands of the whole mess left behind. Apparently, people here forget how Vietnam, Iraq, Afghanistan, Libya, and now probably Ukraine turned out.

            Chris Hedges: “There are many ways for a state to project power and weaken adversaries, but proxy wars are one of the most cynical. Proxy wars devour the countries they purport to defend. They entice nations or insurgents to fight for geopolitical goals that are ultimately not in their interest. The war in Ukraine has little to do with Ukrainian freedom and a lot to do with degrading the Russian military and weakening Vladimir Putin’s grip on power. And when Ukraine looks headed for defeat, or the war reaches a stalemate, Ukraine will be sacrificed like many other states, in what one of the founding members of the CIA, Miles Copeland Jr., referred to as the “Game of Nations” and “the amorality of power politics.”“

            It is often said that the US is willing to fight Russia to the last UKrainian.

            Why would anyone support such a policy?

          3. pgl

            August 3, 2023 at 12:52 pm
            Where exactly do I relish the hardship of Ukrainians?”

            Guide for a Married Man (1963) had a scene entitled “deny, deny, deny”. JohnH has mastered this art.

          4. Macroduck

            “Where exactly do I relish the hardship of Ukrainians?”

            This is Johnny’s latest trick. If you can’t find d a quote from Jih NY which reads “I relish the hardship of Ukrainians”, he’ll pretend he’s clean.

            Johnny is a fan boy for Russia’s invasion of Ukraine. That has been clear from the beginning.

      1. pgl

        Gee little Jonny boy did not tell us about this. Actually Newsweek has lot of posts like this but you will not see little Jonny boy noting these posts. And why? Because if Putin’s pet poodle told the truth about this war, the Kremlin would cut off his dog food.

        A new clip has surfaced online appearing to show Russian rocket launchers being taken out by U.S.-supplied Ukrainian HIMARS. A Ukrainian air reconnaissance unit, going by the name “Kraken,” had detected the multiple launch rocket systems and disabled two of the self-propelled systems with HIMARS fire, the unit said in a post to social media on Wednesday. Russian forces “lost personnel,” the unit added, although how many troops were killed in the strike was not specified. Newsweek could not independently verify the location or timing of this footage, and has reached out to the Russian and Ukrainian defense ministries for comment via email. It appears Kyiv has increased its efforts to retake territory in southern Ukraine after the long-awaited counteroffensive’s slow start. On Wednesday, Russia’s Defense Ministry said Ukraine had launched “intensive” offensive operations and a “massive attack” in western Zaporizhzhia.

        1. JohnH

          Yes, there has been a constant stream of articles in Newsweek and other media outlets purporting to show how well Ukraine is doing. What’s different now is that the narrative appears to be shifting, and articles are appearing that question that propaganda and advocate a negotiated end.

          Seymour Hersh (July 15, 2023): “Careful readers of the Washington Post and the New York Times can sense that the current Ukraine counter-offensive is going badly because stories about its progress, or lack thereof, have mostly disappeared from their front pages in recent weeks. ”

          Responsible Statecraft: “When facts cut through the fog of war …The fog of war over much of the last 18 months has skewed press coverage and our understanding of what is happening in Ukraine. Yet media opacity can no longer mask the facts on the ground.

          In only the past week, reports have emerged in the Wall Street Journal, CNN, the Financial Times and the New York Times indicating, among other things, that Ukraine’s much awaited spring offensive has ground to a virtual stalemate and munitions from its NATO-allied partners are drying up.

          The situation is such that, as the Financial Times columnist Ed Luce noted, “At some point, Volodymyr Zelensky … will need to sit down with Vladimir Putin, or his successor, to REACH A DEAL.”

          Telegraph (UK): “Ukraine and the West are facing a devastating defeat”

          Responsible Statecraft: “Why Ukraine’s counter-offensive is failing …As unpalatable as it is for all supporters of Ukraine, the most prudent course for Zelensky may now be to seek a NEGOTIATED SETTLEMENT that preserves as much freedom and territory as possible for Kyiv. Ending the war now would end the deaths and injuries for tens of thousands of Ukraine’s brave and heroic fighters — men and women whom Kyiv will need to rebuild their country once the war ends.”

          Time Magazine: “Ukraine’s Counteroffensive Needs a Plan B…if coupled with a diplomatic approach that incentivizes Russia to end the fighting rather than prolong it to keep Ukraine out of NATO, it could well prompt Russia to aim to secure its still quite limited gains through a NEGOTIATED END to the war. It is time to try.”

          Instead of trying to fight Russia to the last Ukrainian, why not give peace a chance? Why not sit down with Russia and find a way to end the suffering and destruction? In retrospect, the spurned and sabotaged Minsk Protocol is looking better and better

          1. pgl

            Check out Dr. Chinn’s latest post. Congrats Jonny boy as you have an enormous lead for 2023 troll of the year!

          2. pgl

            ‘the spurned and sabotaged Minsk Protocol is looking better and better’

            Yea but as I already noted – your boy Putin was the person who trashed this protocol. And Jonny boy repeats this line? Lord – you are the dumbest troll God ever created.

        2. pgl

          “What I am pointing out is the US’ cynical, repetitive policy of getting itself involved in pointless and futile quagmires”

          Putin not Biden started this war. Putin continues a war that he could end today. You know that but you dodge this fact. And yes – you do relish Putin’s war crimes. But of course you have no shame and zero integrity.

        3. Ivan

          Its the classic cherry-picking strategy. Ignore all that speaks against my favorite narrative and present that one thing which can be twisted into supporting it. Very popular on Faux news. Not advisable for people who want the truths.

          If you want true insights you have to let your narratives be guided by information not the other way around.

    3. pgl

      “In retrospect, the Minsk Protocol may come to be viewed as a golden opportunity spurned and sabotaged”

      Funny you mention the Minsk Protocol since it was your boy Putin who violated it with his 2022 invasion of Ukraine. And Jonny boy cheers on Putin’s continuing war crimes.

  8. Macroduck

    For some definitions or “rural”, this is the dumbest idea imaginable:

    China intend to send (exile?) unemployed college graduates and entrepreneurs to rural areas for “employment”.

    This plan assumes that any particular training or inclination fits in any need. The fact is that urban areas are more productive than rural areas. That’s in part because of the diversity of labor marker needs; almost any modern skill set can find productive use in a big city. Rural settings are less productive in part because there is less need for specialized skills. This is Smith’s pin factory in action.

    China has a large problem with unemployment. Maybe somebody with no understanding of economics, but a strong reactionary streak, thinks sending volatile elements to the countryside is a good idea. It worked before, right? And it hides the problem from politically important urbanites.

    This is a master-class in turning high-productivity potential (college graduates and entrpreneurs) into low-productivity workers.

    1. Ivan

      Shadows of Mao. They can plant rice now that India has blocked exports and the world is trying to deal with that.

    2. pgl

      China intend to send (exile?) unemployed college graduates and entrepreneurs to rural areas for “employment”.

      China’s youth flocked to the big cities because that was where the jobs were. Sending them back to the rural areas is not going to increase their job opportunities.

  9. James

    Great post – thanks Menzie. One minor comment – I think it may be a typo: “Note that the Republican view is much more positive than Republicans during the Trump administration, but switched to much more negative during the Biden “Should this be: Note that the Republican view is much more positive than Democrats during the Trump administration, but switched to much more negative during the Biden” Thanks – fascinating . (IMO – Democrats are much more reality based in their views of the economy. I found former VP Pence comments yesterday on Trump’s third indictment fascinating – (I am paraphrasing ) – No person is above the law but we need to get rid of Biden because the economy is terrible – and I think: What?! – GDP growth 3x Trump, 7x as many Biden jobs as last 3 GOP Presidents combined, best COVID recovery in G7, inflation now down to pre-pandemic levels, lowest unemployment rate in 54 years, lowest poverty/uninsured rates ever, elevated wage gains/new business starts, real earnings up in 2022, historic investments in our future prosperity (infrastructure, CHIPs, climate, health care) – I think Pence is living in the Fox bubble –

    1. pgl

      “No person is above the law but we need to get rid of Biden because the economy is terrible”

      And the economy was doing great in 2020?

  10. ltr

    — blames both parties, because her goal is serving the agenda of the CCP, not truth.
    — blames both parties, because her goal is serving the agenda of the CCP, not truth.
    — blames both parties, because her goal is serving the agenda of the CCP, not truth.

    [ Stalking, bullying, a need to intimidate. Always falseness. Such is the fanaticism of racism. ]

    1. Macroduck

      The racism of gloating g over deaths in Vermont? The racism of denying China’s enslavement of Uyghurs? The racism of government ministers calling for Asians to united against other races?

      Look who’s calling who “racist”. Look who’s calling the truth “bullying”.

      1. pgl

        Well at least she stopped calling me racist. Some other dishonest and juveline line that she probably picked up by consulting with JohnH. When trolls cannot defend their bogus claims – they resort to dumb name calling.

  11. pgl

    Sean Hannity had little Lindsey Graham on after Trump’s latest indictment:

    “Well, Sean, any conviction in D.C. against Donald Trump is not legitimate,” Graham responded, adding that “they’re charging him with a crime of taking bad legal advice. That’s what this is about. They’re trying to criminalize the attorney-client relationship. They’re trying to criminalize exercising the First Amendment.”

    I get little Lindsey is a Trump toady. I get little Lindsey is terrible at law. But come on Lindsey – couldn’t you bother to READ the indictment? After all it is only 45 pages and is written in plain English. But I guess that is over little Lindsey’s pea brain.

  12. pgl

    Stop the presses! Marjorie Taylor Greene is a racist! web and graphics designer who collaborated with white nationalist Nick Fuentes worked for pro-Donald Trump lawmaker Rep. Marjorie Taylor Greene, R-Ga., throughout 2022 and into 2023, a Hatewatch investigation found.

    Lance W. Smith, 23, of Melissa, Texas, purchased or managed multiple web domains associated with Fuentes and his “America First” movement, livestreams on Fuentes’ website under the pseudonym “UX,” and owns a gaming server for Fuentes fans. While associating himself with Fuentes’ wing of the white nationalist movement, Smith received $55,020 from Greene’s congressional campaign between June 24, 2022, and May 1, according to Federal Election Commission (FEC) records reviewed by Hatewatch. On one page of his online portfolio, Smith said he “oversaw production of the representative’s podcast and managed the creative direction of her campaign.”

    1. Ivan

      “managed the creative direction of her [MTG] campaign”

      So THAT’s why. A nazi in charge of creative directions.

  13. Ivan

    After 30+ years of Faux news people don’t need no stinkin’ data or knowledge to interfere with their opinions. SAD.

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