At DHM Research, we are committed to a deep understanding of public perceptions in the Pacific Northwest. As our team has grown, we’ve added researchers with expertise in the region’s economy. One of the questions that often comes up with our current team is how public opinion and the economy—in particular economic indicators like unemployment rate and inflation—relate to each other.
With the help of Anas Qutub, our 2024 intern from the Script (formerly Emerging Leaders), DHM’s economics team took a first pass at exploring this question. Using summary statistics and simple regression analysis, we utilize data from our regular DHM panel survey combined with publicly available economic indicator data to explore correlations between public opinion and economic indicators*. The econometric models used in this analysis are simplified and incomplete—they fail to control for the many methodological and data-related pitfalls that befall econometrics. We make no causal claims but instead present interesting correlational observations and analysis based on our knowledge of the region.
General Sentiment on the State’s Direction and Financial Situation
Unsurprisingly, we observe a correlation between Washingtonians’ views on the state’s direction and the economic conditions. For example, our analysis finds that increases in negative sentiment regarding the direction of the state are loosely correlated with increasing mortgage rates. When mortgage rates rise, Washingtonians are more likely to feel that the state is headed in the wrong direction—a finding that fits in a state where the cost of housing has increased quickly in the past decade.
Another eye-catching observation related to the state’s direction is that higher inflation and interest rates are associated with a more positive outlook on the state’s direction. This suggests that as inflation and interest rates increase, people tend to think more positively about the direction of the state. Initially, that feels unintuitive; why would people feel good about high inflation? However, we turn to the Phillips curve for an answer.
This fundamental economic concept suggests an inverse relationship between unemployment and inflation. In periods of low unemployment, inflation tends to rise, signaling a potentially growing economy—which could promote a more optimistic view of the state’s future. During the September 2022 DHM panel survey, inflation was at a high of 8.20%, while unemployment was at a historically low and healthy rate of 4.2%.
Perceptions of the State’s Direction by Demographic Groups
While DHM’s Washington panel data only goes back to 2022, the number of responses collected over the last couple years allowed for some regression analysis of demographic subgroups.
Something that stood out in subgroup analysis is that income and education levels (which tend to be collinear) significantly shape how people view the state’s direction. When looking at the entire sample, higher-income earners, particularly those making between $100,000 and $150,000, are more likely to think the state is on the wrong track when mortgage rates rise compared to other income groups. Again, the high cost of housing in Washington is likely in play here. According to research from Realtor.com, those shopping for homes in Washington State need to earn a minimum of $147,606 a year to afford an average home. Similar research conducted by digital real estate company Zillow came to a similar conclusion.
On the other hand, among lower-income groups, our findings did not reveal any correlation between the state’s direction and changes in mortgage rates, suggesting varying impacts across economic levels.
Looking at positive correlations, we observed that individuals with higher education levels, especially college graduates, are more optimistic about the state’s direction when inflation rises. This likely stems from the economic stability and opportunities that come with higher education and the way the Phillips curve plays out for folks with college degrees in Washington.
Another factor that is likely in play here is that college education is correlated with party affiliation. People with a college degree are more likely to be Democrats, and DHM’s panel surveys of Washington residents consistently show that Democrats are more likely to believe the state is headed in the right direction.
Conclusion
This analysis highlights a few statistical correlations that provide a unique, though incomplete, look at the complex connections between public opinion and the economy. Coming out of an election where the economy was front and center, we will continue to weave DHM’s deep knowledge of public opinion in the region with our team’s ability to apply more complex quantitative methods.
*Methods Overview: Our analysis drew from a range of DHM panel surveys conducted across Washington state from 2022 to 2024, focusing on diverse demographic groups. We used both Ordinary Least Squares (OLS) and Logistic Regression models to assess the correlation of economic indicators with public sentiment. Note that while these models reveal correlations, they do not imply causation.