There’s great economic news in the just-released February employment report—638,000 new jobs, a 3.8% unemployment rate, and average weekly earnings up by 5.4% over the past year. But many Americans have a sour, negative view of the economy. Why the disconnect?
The aggregate US economy is almost back to pre-pandemic levels, in significant part because we spent a lot of money to fight the pandemic recession. That economic stimulus, plus a job-oriented Federal Reserve, was what the economy needed. Today’s continuing strong job numbers confirm that.
Economist Elise Gould at the Economic Policy Institute, one of our best labor market analysts, tells us “private sector employment is now only 1% away from pre-pandemic levels.” But she notes we still are “facing a 3.7 million job shortfall” once population growth is taken into account, with Black unemployment double that of whites. So we shouldn’t be slowing the economy yet.
But what about inflation? As my last blog discussed, many economists see our current inflation tied to specific supply chain and industry effects, and to the disproportionate impact a few sectors have on our overall measure of inflation. That can’t be easily fought with generalized monetary policy. Sharp increases in interest rates could harm the overall economy without really addressing our current inflation.
The rapid rise in inflation is blamed by some for people’s negative views on the economy. But that picture is complicated by people’s assessments of their own situation. Economist Paul Krugman recently pointed out that “a plurality of Americans say their personal financial situation is better than it was a year ago,” at the same time opinion polls show negative views about the overall economy.
And overall views aren’t good. A February survey for USA Today found only 19% of respondents saying we are in an economic recovery, while 30% said a recession, and 21% said a depression. That poll was taken when the most recent monthly job gain was 467,000 with a 4% unemployment rate, and coming off of a 6.9% increase in real GDP during the fourth quarter of 2021.
Other opinions also are gloomy. Consumer sentiment has been dropping sharply since April of last year. January’s level was actually below April 2020, right after the pandemic had virtually shut down the economy. But even with those negative attitudes, real personal consumption expenditures hit an all-time high in January , 27.6% above April 2020 when the pandemic was hitting.
How can consumers spend so freely while holding such negative attitudes about the economy? Some of it is tied to general negative views on the country’s direction, with polls showing strong opinions the country is on the wrong track, and that could be affecting economic sentiment. (Of course, negative economic views also can feed into that overall “wrong track” opinion.)
Some of it may be tied to worries about inflation. But Krugman pointed out research showing that “long-run inflation expectations have stayed remarkably stable, suggesting that people don’t see things as being out of control.” And research by the Pew Research Center shows the pandemic’s duration and scope is having a negative impact on people’s views of the economy.
Why isn’t the positive economic message getting out? Some point to negative reporting from the media and aggressive use of social media criticizing Biden. They may have a point.
In his State of the Union address, Biden talked up the economy. The President pointed to last year’s 5.7% growth rate, “the strongest growth rate in nearly 40 years,” and the creation of “over 6.5 million new jobs…more jobs created in one year than ever before in the history of America.”
But in what seemed like a parody of fact-checking, The New York Times said Biden’s factual citation of 6.5 million jobs created in one year was only “partially true.” Why? According to the Times, “the government only started collecting this data in 1939.”
Historians quickly pointed out there is useable historical data on US employment, some of it going back to the 19th century. And they reminded the Times our population was much smaller in earlier years, making any previous annual increase above 6.5 million jobs extremely unlikely.
Others had more fun with this “fact-checking.” The Rude Pundit parodied the Times: “Fact check: Neil Armstrong is the first man on the moon. NASA is correct on the person and location, but we should note that film cameras were not invented until 1892, so we have no way of knowing if someone got there earlier. Partially True.”
But the potential impact of this one-sided, negative economic media coverage isn’t funny. The media’s strange attempts at “even-handedness” (what some observers mock as “both sides-ism”) undercut the message on Biden’s economic success.
We haven’t fully closed the jobs gap from the pandemic, Black unemployment is still too high, and lower-paid workers (especially at the minimum wage) need wage increases. But the economy under Biden has been roaring back, so it’s a puzzle why economic sentiment is so bad.
There’s no alternative except for Biden and his allies—and economic and political journalists—to report the good economic news, like the strong jobs numbers we saw on Friday. Hopefully continued positive economic numbers will make a dent in people’s puzzling negative feelings.