Attn Millennials! I realize that you can't and won't be able to afford a house and prices of non-durable goods (oh yah durable goods also) have skyrocketed since the pandemic (but your salary hasn't). After going up 60%, murder rates have eased by about 10%, and burglaries still going up.
The point I'm making is things are honestly going pretty well. Especially if you'll avoid dwelling on the tent pitched outside your nifty rental apartment. Just step over the guy.
And for god's sake don't take the easy way out and blame your misfortune on the elderly. Joe is a spry 81.
An economic mystery
By German Lopez, NY Times
Jan 23, 2024
By many measures, the U.S. economy is strong right now. Unemployment is near its lowest point in decades. Inflation has slowed down. Wages have grown faster than prices since last year. Stock prices have surged.
But many Americans are not feeling it, and say the economy is in bad shape. The persistent pessimism has baffled many economists.
The situation may be changing. American confidence in the economy has picked up in recent months, surveys show. And President Biden’s campaign hopes the turnaround will boost his re-election prospects.
Still, measures of consumer confidence remain lower than normal. Why have Americans resisted the good economic news? Experts have tried to answer that question for months. Today’s newsletter will cover seven of their leading explanations.
1) Inflation
The first, and most obvious, explanation is rising prices. Historically, Americans hate high inflation. For one, it is universal; high prices affect everyone. In comparison, high unemployment directly affects only a minority, even during recessions.
“When prices rise, it feels like something is taken away from you,” my colleague Jeanna Smialek, who covers the economy, told me.
A chart shows monthly inflation since 2005. In December 2023, inflation was 3.4 percent, and core inflation, without food and energy, was 3.9 percent.
Year-over-year change in the Consumer Price Index | By The New York Times
Inflation has cooled recently. But that does not mean that prices have necessarily decreased; they are merely rising much more slowly than they were when the inflation rate was at its highest. Consider: The average price for one pound of chocolate chip cookies peaked in March. But it still costs about $5.10 today, up from $3.50 four years ago.
2) Housing costs
Among higher prices, one category stands out for many Americans: housing. It is typically the most expensive thing that Americans own or pay for. As housing costs increase, they can squeeze people’s ability to pay for anything else.
And costs have increased. Rents have climbed by about 22 percent since late 2019, and a key measure of home prices is up by about 45 percent.
3) No normalcy
During the pandemic, many people looked forward to the day when things would return to normal. So far, they haven’t.
Murder rates have fallen in the last two years, but they are still higher than they were before the pandemic. Dangerous driving is more common. Downtown foot traffic remains down in many cities. The upcoming presidential election will likely duplicate the contest from the middle of the pandemic.
These factors do not always appear in economic statistics, but they color people’s perceptions of their lives and the economy.
4) Asymmetric polarization
Economic confidence surveys capture the political mood. When a Republican is in the White House, Democrats tend to take a more negative view of the economy. And vice versa.
But the trend is not symmetrical. Consider this data from the pollster Civiqs: When Donald Trump won the 2016 election, Democrats’ views of the economy soured but remained mostly positive until the pandemic. After Biden defeated Trump, Republicans went from describing the economy in overwhelmingly positive terms to using overwhelmingly negative ones.
A chart shows the share of the public, by party affiliation, who rate the condition of the U.S. economy as very or fairly good since January 2015.
Source: Civiqs | By The New York Times
In other words, Republicans react much more strongly to a president from the opposite party than Democrats do. That disproportionately affects the national mood during this Democratic administration.
5) Bad-news bias
The news media often presents a negative view of events, possibly making people feel worse about the state of the world.
Rising inflation got a lot of regular, and widely viewed, news coverage. Better economic news, including drops in inflation and low unemployment, has received less attention. Many Americans have heard the bad news but not the good.
6) Social media’s role
One does not have to wander deep into social media to find negative commentary on the economy. Memes about the woes of capitalism and anger over high prices are common. Younger Americans tend to get most of their news from social media, and they also have worse views about the economy by some metrics.
(The Times looked at the grim view of the economy that is common on TikTok.)
7) Delayed response
Maybe the rift between the state of the economy and Americans’ perceptions is less of a mystery than it seems, and the paradox will soon end. People just need more time. After years of uncertainty driven by a pandemic and then inflation, many Americans might want to make sure that things are truly turning around before they buy into any potentially false hopes.
One fact supporting this conclusion is that consumer sentiment has started to improve after more than a year of cooling inflation, as Jeanna wrote yesterday. As the challenges that made Americans pessimistic ease, attitudes about the economy could relax as well. Their views could even change in time for the presidential election.
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