Sunday, October 13, 2024

In reality, the US economy in October 2024 is great. Will enough voters believe that?

One of the most infuriating things in this election cycle is the flat-out BS that Republicans and too many American voters believe when it comes to the state of the American economy. By any objective measure, we are in a great situation, and yet GOPs are trying to convince people that it's all bad and that all of the good things that are happening in the Real America aren't happening.

Heather Long of the Washington Post penned a recent editorial taking issue with that, and said that if facts matter, Americans should be very happy with the country's economy.

Polarization in the United States makes it difficult to talk about any truth, even about the economy. Last Friday’s jobs report surpassed all expectations. As soon as it came out, Republicans such as Sen. Marco Rubio of Florida tried calling it fake. In reality, even if the report is later revised down, it will still show an economy that is humming along. And consider the bigger picture: The United States has nearly 7 million more jobs than it did before the pandemic, and the largest share of 25-to-54-year-olds working since 2001. Many experts didn’t think it even possible for the labor market to become this robust again. Some theories considered Americans too addicted to video games or drugs, or simply too lazy to work. The jobs rebound has proved the experts wrong.

The story on inflation is similar. Two years ago, economists were predicting a recession. Many said it was impossible to lower inflation without a downturn and widespread job losses. Yet we are living through this miracle. Report after report shows inflation cooling off. On Thursday, we learned that inflation has cooled to 2.4 percent. It’s so close to the 2 percent target again even Federal Reserve officials aren’t that worried about it anymore. And there is no recession in sight.
Long also notes that for all the talk of the stress that past price hikes have caused, Americans' wage gains have generally been larger than price increases, especially among those on the lower end of the wage scale.

Overall, inflation-adjusted hourly wages are more than 2% higher than they were at the end of 2019 (aka pre-COVID), and are nearly 3% higher than they were at inflation's peak of June 2022. And yet Republicans are insisting that things are no better than they were 2 years ago, if you listen to the (rapidly-dwindling) economic-based ads that they run.

Long admits that your mileage may vary depending on your personal circumstance and the housing costs in your neighborhood. But whatever stresses exist have not held back everyday Americans from spending money at a rate that is well above the amount of price increases that may have existed. And now borrowing costs are heading down for those who may have been hurt from the higher interest rates of the last 2 years.
This doesn’t mean all is perfect. The third of American households that rent their homes have faced painful increases, and many have lost hope that they will ever be able to buy a home. And although the job market is robust, hiring has slowed. Younger Americans are struggling to get jobs, especially in white-collar industries. The manufacturing sector has also been in an slump lately. (The Fed rate cuts should help alleviate some of this pain.)

Nevertheless, the economy is excelling on many fronts, much as it did in the late 1990s. And polls show that Americans are beginning to notice. JPMorgan’s chief global strategist, David Kelly, has pointed out that the “misery index” (a combination of the inflation and unemployment rates) has dropped lower than it has been 89 percent of the time in the past half-century. The best metric to watch is consumer spending. Even as Americans tell pollsters they are gloomy, they keep on spending — especially on eating out, visits to amusement parks and pumpkin patches, and tickets to concerts and sports events. This is yet another signal of a healthy economy.
In addition, I'd mention that recent revisions from the Bureau of Economic Analysis shows that Americans had significantly higher incomes than first reported, and as a result, personal savings rates have been near or slight;ly above 5% of income for the last 18 months, which isn't much different than they were in the late 2010s.

I also note this interesting release from the Biden Administration's Council of Economic Advisors, who say that the higher wages for typical American workers translates into groceries being more affordable now than they were in much of the Trump years.

Which again illustrates a central question in this election. Do American voters believe in the reality that Republicans are trying to convince them of, or do they believe the one that exists in the outside world? And it's amazing and discouraging that we don't have a definitive answer for that question. I have optimism that Real Reality wins out (which means that Dems will win out in 23 days), but I can't guarantee it yet.
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