You want a brief summary of all the latest news in one place? Inflation. Labor shortages. Supply-chain issues. Omicron. Partisanship. Gridlock. Biden stalled. Trump shouting.
Given that, it’s hardly surprising that many Americans are feeling not so good about the country in general and, more specifically, about this thing we call the economy. However, data on our economy show that it is moving in an entirely different direction. It’s up.
The news, while not in itself to blame, is indicative of where the mood is. The new COVID-19 surge has created more anxiety and unease, as well as the dimming prospects for massive social spending following Sen. Joe Manchin’s announcement that he wouldn’t vote for Build Back better. These factors will not change the story or shift the mood.
If you look at the situation from a different perspective, however, it’s quite clear that things have changed. The various gauges we use to measure the economy are almoSt all as good or better than they’ve been in years, and in aggregate, better than they been since the beginning of the 21st-century. The trend in GDP growth, unemployment rates and average wages has all been positive. With unemployment hovering around 4% (a multi-year low), New York City is lagging behind. In 2021, GDP growth will be over 5.5%, which would mark the highest since 1984. Wage growth at the bottom of economic pyramid was notable for the first generation. Actually, the rate of wage growth at the bottom has been greater than inflation.
People with less income are most affected by inflation. It can be difficult to make ends meet if you have to pay an extra $10-20 for gas, and $5-10 each time you purchase food. Inflation running at 6.8% in November and low-wage employees seeing average wage increases of 8% as they try to satisfy the rising demand for goods or services. That trajectory may be dented if Omicron leads to nationwide slow-downs but it is unlikely to be halted given a booming economy and pent-up demand that hasn’t yet been sated by a few months of explosive activity. Some dispute whether those gains have been as significant, and given the complexity of calculating, we won’t really know for sure what the wage picture is until later next year. Still, with so many large companies raising minimum wages and so many positions unfilled, there’s no question that low-end workers are doing better even with higher inflation.
In addition, unlike with the stagflation of the 1970s and the subsequent double-digit inflation of the early 1980s, today’s inflation is directly a product of more people with more money consuming more goods and services all at once after a pandemic year of selective consumption. Inflation is now caused by both increased incomes and government spending. Today’s inflation is not an indicator of trouble but a side effect of a stable system. That doesn’t mean inflation can’t be harmful or won’t end up being destabilizing the economy. In this sense, inflation can be compared to obesity. It is a sign that there is too much and not enough, but it could also indicate impending recession or scarcity.
But the public mood and the narrative don’t reflect those statistics. The chasm between how our public understanding of what’s going on economically and what our numbers say is not just a feature of our present. Americans feel optimistic about the future only at a few moments in the past 20 years. At no point since the bursting of ‘90s tech bubble and the subsequent recession of 2000 have American felt as good about the economy as they did throughout the 1990s, and the high point after twenty years of ups and mostly downs was January of 2020, when confidence about the economic future reached about where it was in early 1990s. COVID-19 was then introduced.
Actually, twenty years ago has seen a series of problems that have degraded American confidence. The stock market internet bubble burst of 2000; the botched “hanging chad” election of 2000; the attacks of 9/11; another stock market crash and corporate scandals such as Enron in 2002; the Iraq invasion of its aftermath in 2003-2004; revelations of metadata spying and torture in US military prisons in 2005-2006; the bursting of the housing bubble in 2007-2008 followed by the Great Recession of 2008-2010; a few decent economic years from 2013 to 2016 which nonetheless didn’t prevent the rise of Donald Trump in 2016; the acrimony of the first Trump years and then the pandemic in 2020 and riots and protests over race followed by the contested election and January 6.
This context makes economic dyspepsia more logical. The fact that the richest have become much wealther over the last decades while middle class has continued to struggle as usual, and the bottom is still struggling, makes sense. And the rise of China as an economic challenge to American global hegemony has also discombobulated a people and a country that had long defined itself—and prided itself—for being at the top of the global economic pyramid.
It’s not all about how we feel: even while our numbers look good, they mask shifts and changes that can be deeply unsettling and often disruptive. A steady rise in healthcare expenses. The drip-drip erosion of northeast and Midwest manufacturing; the opioid crisis in those regions; the changing composition of a workforce towards more service oriented and often less secure and sometimes less remunerative jobs; the way technology creates change at a faster pace than most of us can easily adjust to, all of that doesn’t show up in GDP and employment numbers but intimately shapes how we live and how we experience life.
We must be able to discern between our sentiments and the numbers we use to evaluate how we manage to get through the day. The numbers don’t tell us everything, and indeed tell us little about any one individual or community. The numbers can chart patterns over time and these trends are for the most part unambiguously positive.
Looking ahead to 2022, one can recognize that economic conditions have rarely been this good. But, at the same time, many of us have never felt as disconnected and uneasy about these numbers. We all need to stop and take a deep breath. That doesn’t mean any of us should be complacent, but we all need to check the tendency to see only clouds.