One of the Three is Not Like the Others: The Partisan Divide and Economic Sentiment

Here’s the U.Michigan sentiment indices for three partisan groupings, vs. the SF Fed News Sentiment index.

Figure 1: CShapiro, Sudhof and Wilson (2020) Daily News Sentiment Index (black, left scale), University of Michigan Consumer Sentiment for Democrats (blue), Independents (green), and Republicans (red).  Source: U.Mich, SF Fed, and author’s calculations.

Here’s the same plot, but using the (inverted) Misery Index (simple sum of y/y CPI inflation rate and unemployment rate).

Figure 2: Inverted Misery Index (black, left scale), University of Michigan Consumer Sentiment for Democrats (blue), Independents (green), and Republicans (red).  The Misery Index for January uses Cleveland Fed nowcast for CPI as of 2/2/2024. Source: BLS via FRED, Cleveland Fed, U.Mich, and author’s calculations.

Republican sentiment is flat even as Democratic and Independent sentiment trends up with either news sentiment or inverted Misery.

Note that there is sampling error for each of these indices, so I don’t know if the differences in movements (let alone levels) are statistically significant. What I do know is that the adj.R2 for a regression of Democratic sentiment on news sentiment is about twice that for Republican, and the coefficient is about 50% larger, for the period 2021-2024M01.

More on the indices, see here.