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The Economic Numbers Are Great. Why Are We So Down?
Despite the success of Bidenomics, the United States has a pessimism problem. Why?
The news lately could not have been better for the U.S. economy. But you wouldn’t know it from the way Americans talk about it.
The gap between economic reality and perception has now grown so wide that we need to start asking some hard questions about why exactly that is.
Before we jump into that perception gap, let’s review the actual numbers and beat back some common misperceptions.
If you find yourself asking, “But what about…?” then this discussion might help answer your questions—and you might even realize you’ve bought into the same counterfactual narrative about the economy.
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Inflation Is Still Bad, Right?
Nope. Inflation, which had remained persistently high in the aftermath of Covid supply chain disruptions and a war started by Russia in Ukraine, has dropped down to normal levels, rising just 0.2% in June, which comes to just a 3% annualized rate of inflation.
That’s in the barely-noticeable-range for most consumers.
But prices are still high, right?
True. But inflation is about how quickly prices are rising, not how high they still are. While some things like eggs and gas have fallen in price, and that affects overall inflation readings, what U.S. consumers crave over time is price stability.
If the cars, food, gas, rent and other things we pay for haven’t gone up much in the last six months, it’s because inflation—the rate at which prices are rising—is indeed low.
But What About All Those Layoffs?
That’s a good question. But ask yourself where you have heard about layoffs happening. Two big sectors spring to mind: media and technology.
But as Chris Hayes of MSNBC points out, those are also the two sectors with the loudest megaphones. When we hear about trouble in the tech and media sectors, and we often do, there’s a tendency to extrapolate those problems across the entire economy.
But the economic problems those sectors face are not replicated across other industries.
The rest of the economy actually continues to add jobs—lots of jobs—with over 209,000 more created in June. This is in part because of historic, bipartisan investments we are making into infrastructure and manufacturing coming off the CHIPS bill, all of which was made possible by Biden’s smart and successful economic policies.
But These Are Crap Jobs, Right? With Low Pay?
This is another misperception. According to the Conference Board—which has been conducting job satisfaction surveys for over 35 years—“U.S. workers have never been more content.”
While we hear many stories about discontented workers, those aren’t reflective of the vast majority of the workforce.
But wait, these low unemployment numbers must be because people have dropped out of the workforce, right? That’s certainly what we heard a lot about during the pandemic.
But again, the data says otherwise. In fact, as economics professor Paul Krugman points out, labor force participation is right back up with prepandemic levels. It’s simply not true that low unemployment rates are the result of people leaving the workforce.
But aren’t people one paycheck away from…
Again, the data doesn’t show that Americans are living on the edge.
In fact, as reported in the Washington Post just this week:
“Americans are still better off now than before the pandemic, with nearly 10 to 15 percent more in their bank accounts than in 2019, new checking and savings account data shows.”
So, yes. We have more job security and more money in the bank.
Sounds good, right?
The Best of All Outcomes
Where this leaves us is in the odd position of pointing out the obvious: The economy is looking great. Inflation is under control, barring some new spike in oil prices from war or other outside factors.
Moreover, good jobs are plentiful, the workforce is participating as fully as ever, and unemployment is at 50 year lows.
The White House is seizing upon these numbers and is out promoting the success of “Bidenomics,” as it should. Bidenomics places an emphasis on growing the economy from the bottom and middle out, not top down.
And the results should be what every economist, CEO and working family wants to see: economic growth, strong job figures, and falling inflation. Indeed, among the G7 nations, the U.S. had the strongest growth and the lowest inflation of the group.
That’s right, we’re Number 1!
You’d think with these stellar numbers that Americans would be bullish about our economic prospects.
After all, this is no blip. Job growth is being fueled by a massive investment in manufacturing and infrastructure, meaning good paying jobs that won’t be shipped away.
But if you poll most Americans, this isn’t at all how they feel about the economy. Going back to the conundrum at the top of this piece, there’s still a gigantic disconnect between public sentiment and the hard data.
This is confounding for the Biden White House, which wants to tout the success all the way to a second term in office. And it’s a head scratcher, too, for economists and analysts.
They seem both dumbfounded by the failure of the “Biden recession” to appear, yet left without any good explanation for why people think things are so bad.
Dig Deeper into the Politics
To get at what’s going on, we need to go a bit deeper. It turns out that, beneath the poll numbers, the economic gloom and doom of today come disproportionately from GOP voters.
Polling shows only 13 percent of Republicans believe the economy is in good shape compared to 47 percent of Democrats who do. That is a massive, 34 percent gap in perception.
Wait, are you saying that people who are glued to right-wing media like FOX and OAN, and who by and large support Donald Trump, might not be capable of squaring reality with their own belief systems?
That they would ignore the data, the experts, and their own eyes in favor of a political narrative that insists that we are near financial ruin?
That is exactly what I’m saying.
While partisanship has always played a part in perception of how bad or good things are, depending on if your guy is in the White House, there never used to be quite so wide a party gap as we see today.
And that’s why it is almost pointless to include MAGA cultists in these economic surveys because they will always find some reason to doubt the health of the economy. It just isn’t possible in their eyes that Biden could be doing a good job.
What I’m Experiencing Isn’t Universal
There’s another curious factor at play here. In survey after survey, the vast majority of people respond that their own financial outlook is fine, but that they are worried about the rest of the country.
In fact, in 2021 a record high number of respondents to a Federal Reserve Survey were positive about their own finances, while a record low number of people were positive about the broader economy. It showed that the “share of adults doing at least okay financially rose to the highest level since the survey began in 2013.”
So, wait, a record number of people report doing at least okay financially, but somehow the country is doing terribly?
This reminds me of how, during the Black Lives Matter protests, most of the Fox-watching world believed the entire cities of New York and Portland were ablaze, because that was the footage the network kept on loop, when in fact the disturbances were relatively localized.
In an endless quest to keep viewers anxious and tuned in, the media has us all believing the economy is in tatters everywhere, even while the average watcher judges their own economic circumstance to be stable and fine.
It probably doesn’t help that nearly every economist, and certainly every Republican official, has warned of an impending recession that has yet to materialize.
So How Do We Combat the Information Gap?
I like to ask Biden economy skeptics what exactly it would take for them to believe we are on the right track. It’s a useful exercise, which very quickly reveals how far off from reality we might actually be.
Would the economy be good when…
Inflation is back down to pre-pandemic levels?
The U.S. economy is growing faster than any other major power?
Unemployment hits a 60 year low?
Wage growth is up especially among the lowest paid earners?
All of the jobs lost during Covid are fully recovered and then some?
People have more in their bank accounts than they had before the pandemic?
Because guess what?
We’re already in that economy.