SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods.
WAILIN WONG, HOST:
And I'm Wailin Wong. New inflation numbers are out today, and the consumer price index rose 0.4% in September from August. Inflation is up 3.7% from a year ago.
WOODS: And of course, the Federal Reserve is watching these numbers closely. They want to see whether their interest rate hikes have been effective in bringing down inflation. But that CPI data reflects the past. Policymakers also want to know how people are thinking about the future. Are they saving money, or are they spending it? Are they trying to look for a new job?
WONG: The way people feel about the economy is an important leading indicator - something that signals where the economy is headed. And there is one group of researchers that's been asking people how they feel for almost 80 years.
JOANNE HSU: We have been measuring vibes since 1946.
WOODS: Vibe check '46 - I remember it well.
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WONG: I knew it, Darian. I knew you were a time traveler.
WOODS: I am - or at least very elderly. In any case, Joanne Hsu is an economist and the director of the surveys of consumers at the University of Michigan. Every month, the university releases an index of consumer sentiment. The Michigan survey, as it's often called, is closely watched by policymakers at the Fed and elsewhere.
HSU: At the end of the day, who is buying the product that's produced by businesses? It's consumers. And so in a way, there really isn't much of a substitute for asking the consumer how they feel about the economy.
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WONG: And it is a huge task to collect all this data. The Consumer Sentiment Index is compiled one telephone interview at a time. So today on the show, we go behind locked doors at the University of Michigan as they measure the all-important vibes of the consumer.
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WOODS: At the University of Michigan, putting together the Consumer Sentiment Index is very serious business. Joanne Hsu, who directs the survey, works from an office with a heavy, locked door that's in a separate building from where the telephone surveys are conducted.
WONG: And that's where I start my day - at the call center.
Hi, how are you?
UNIDENTIFIED PERSON: Good morning.
WONG: Good morning. Nice to meet you.
WOODS: Phone lines for the consumer sentiment survey are open seven days a week, nearly every day of the year. It takes this kind of schedule to collect the roughly 600 survey responses that go into each month's report.
WONG: When the University of Michigan first started doing this survey, interviewers went door to door. Then they switched to using telephones and a call center.
WOODS: During the pandemic, interviewers did the calls from home. And for Betsy Kirchen, that meant getting home internet service for the first time.
WONG: Did you get a Netflix subscription, too?
BETSY KIRCHEN: No, I didn't. There's marvelous stuff I keep hearing about on TV. I would have loved to watch "Fleabag," although it's queasy-making.
WONG: Betsy, though, as a pretty strong constitution. On the day I'm visiting Ann Arbor, she's working a four-hour shift starting at 9 a.m., and it is a lot of dialing and, honestly, these days, a lot of voicemails because people just don't pick up their phones like they used to.
KIRCHEN: Hello. This is Betsy Kirchen at the University of Michigan calling back about our important research on consumer confidence in the economy.
WONG: Betsy has gotten used to leaving messages. I heard her deliver this little monologue that's like a sales pitch, history lesson and appeal to civic duty all in one.
KIRCHEN: You know, it's not only one of the nation's leading economic indicators that we've actually been researching since 1946. It's also a unique opportunity for you to make sure that your concerns are being heard by policymakers.
WOODS: One important way that the Michigan survey helps guide policymakers is by measuring inflation expectations, so we loved this particular question.
KIRCHEN: During the next 12 months, do you think that prices in general will go up or go down or stay where they are now?
WONG: If the person responds up or down, the next question is, by about what percent do you expect prices to go up or down in the next 12 months? This is a direct question about inflation expectations, which are crucial for the economy.
WOODS: Right - because as we've covered before on the show, expecting higher inflation can itself contribute to higher inflation. According to the University of Michigan's latest survey, consumers expect prices to be 3.2% higher in a year's time. That is higher than the Fed's preferred level of 2%, but those consumer expectations have come down significantly from 2021.
WONG: And Joanne Hsu, the director of the survey, says overall consumer sentiment seems to have turned a corner. The broad index hit an all-time low in June of 2022, but it's rebounded since then.
HSU: A lot of the narrative has been about how consumers feel so terrible about the economy. I mean, they still don't feel great about the economy, but they're feeling more optimistic than they did a year ago or even just a few months ago.
WOODS: Tracking consumer sentiment over time is one of the Michigan survey's strengths. Interviewers don't just cold-call people once. They also call people back for follow-up interviews. Those happen six and 12 months after the first survey.
WONG: But it's a challenge to get all those interviews. It typically takes three hours to yield one completed survey. On the day I'm shadowing Betsy, she is hitting voicemail after voicemail.
KIRCHEN: So we'll certainly keep on trying to reach you from our end, but I want to make sure that you have our toll-free number.
WONG: Betsy does get a couple of people on the phone, but one isn't fluent in English...
KIRCHEN: Do you speak Spanish?
WONG: And then another person is receptive at first...
KIRCHEN: And in case we get disconnected, may I have your first name?
WONG: But changes their mind - and the call ends on kind of a sour note. Betsy doesn't get the interview, and she tells me how that can be dispiriting.
KIRCHEN: It's very hard to truly believe that the individual can make any difference - that we're not somehow locked into a system. I mean, that's not my own belief. That's why I have this job. But a lot of people are just discouraged and pessimistic about the chance of having any influence.
WOODS: I love Betsy's reflections here. She goes deep.
WONG: She does. You know, honestly, if Betsy called me on the phone, I would pick up, and I would answer all of her questions.
WOODS: Yeah, me too.
WONG: And, you know, after hours of dialing, Betsy finally gets through to someone who agrees to do an interview, and she is ready. So I listen as she reads from her script and furiously types notes.
KIRCHEN: We are interested in how people are getting along financially these days. Now, would you say that you and your family living there are better off or worse off financially?
Would you say the government is doing a good job?
Do you think that there will be more unemployment than now?
Do you think now is a good time or a bad time for people to buy major household items?
WOODS: These questions capture how people are thinking about saving money versus spending it on, you know, refrigerators or cars or a new house. That's useful data for the Fed because they're hoping their interest rate hikes will dampen consumer spending.
WONG: Yeah. And you heard that question about is the government doing a good job or not. People's responses also reflect their opinions on government policy.
WOODS: And the survey director, Joanne, says that the way people feel about the economy is colored by their political affiliation. People who identify as the same party as the current president, for example, tend to be more positive on the economy than someone who's not from that party.
WONG: Another factor is news consumption. Joanne says people react more strongly to negative news.
HSU: The share of people telling us over the last year that they've heard bad news about inflation is so much higher than it was in the late '70s in spite of the fact that, objectively, by any measure, inflation was so much worse in the '70s than it was now. People lining up around the block to pump gas - that's not a thing right now. And still, people are saying, oh, I'm hearing such terrible news about the economy.
WOODS: But as we heard earlier, it's getting harder to gather those opinions. Joanne says the University of Michigan is working on ways to collect data over the internet while maintaining the same quality of responses that they get via phone surveys.
WONG: Developing these additional tools is about keeping up with the times, but it's also about future-proofing the work that Joanne and her team does.
HSU: If there is a pandemic 2.0 and cellphone towers don't work anymore - like, let's not think about the possible apocalypse, but we are ready.
WONG: You're like, when the zombie apocalypse comes, we're still going to be able to ask people how they feel about inflation.
HSU: And we'll add some questions about how they feel about zombies, too.
WOODS: That's important - a holistic coverage of the world that we're going to be living in.
WONG: Like, generally speaking, are zombies good for the economy or bad for the economy?
WOODS: Yeah. I'm not going to say anything bad about a zombie.
WONG: 'Cause you're afraid there's one right behind you.
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WOODS: I love zombies.
WONG: You're, like, laughing nervously. Like, I love them. They're great.
WOODS: Some of my best friends are zombies.
WONG: Yeah, exactly (laughter).
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WONG: This episode was produced by Julia Ritchey, with engineering by Josh Newell. It was fact-checked by Sierra Juarez. Kate Concannon is our editor, and THE INDICATOR is a production of NPR.
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