Americans doubt the overwhelming success of the economy. They shouldn't. | The Daily Courier

“Vox populi, vox dei” is the lesson that most politicians and quite a few economists absorb with their baby food.

Roughly translated from Latin as “The voice of the people is the voice of God,” the “vox populi” approach to opinion polling tends to have long-lasting effects on countless government and economic policies.

However, in an election year, the influence of the “voice of the people” goes beyond the power of a known deity and enters the realm of commonly accepted empirical truth.

This is clearly evident in the ongoing debate over the strength of the domestic economy, which is typically associated with White House policy (despite the president's limited ability to influence anything beyond the big picture).

A recent Wall Street Journal poll found that less than a third of voters agreed that the economy had improved over the past two years, despite an average GDP growth rate of 3.9%, the best in over a decade .

Chairman Jerome Powell's Fed has slowed inflation from 9.1% to around 3.1% over the past two years as the economy added 15 million jobs and delivered solid wage gains.

OLIVIER DOULIERY&solGetty Images

A New York Times poll, meanwhile, shows that nearly three-quarters of respondents think the economy is doing mediocre or poor, even though U.S. growth has outpaced every other similar-sized market in the world since the 2020 pandemic.

Jobs, growth and stock market records

The stock market has also hit a series of all-time highs, with the Dow Jones Industrial Average flirting with 40,000 points. That figure is more than 33% higher than at the height of former President Donald Trump's four-year term.

When it comes to individual assessments of the economy, inflationary pressures tend to outpace labor market strength and stock market records, if for no other reason than that rising prices affect everyone, while job losses affect only a much smaller number.

That may be why a major CBS News poll found that most Americans see the economy in a better place under Trump, even though employment, GDP growth and wage gains under his administration are all above pre-COVID-19 averages -crisis lay.

Related: Fed members' updated interest rate outlook rattles markets

In fact, headline inflation pressures have eased significantly since reaching a four-decade high of 9.1% in the summer of 2021, reflecting supply chain disruptions due to COVID-19, rising energy prices related to Russia's war against Ukraine and the The billion-dollar pandemic was due to support from the US government.

The Fed's delayed response to the rise in domestic inflation reflected in major economies worldwide led to the most aggressive series of interest rate hikes in a generation, sending the central bank's key interest rate to a 22-year high of 5.25% and 5 .5%.

Because of those interest rate hikes, the normalization of supply chain flows from Asia and elsewhere, and a decline in gasoline prices, inflation slowed to just 3% last summer. But since then, the pace has remained steady or even higher, driven by stubbornly high costs for rent, cars and healthcare services.

Inflationary pressures are real; The labor market is resilient

That being said, however, inflation stability has been one of the most resilient and Wall Street-defying labor markets ever.

More than 15 million new jobs have been added to the economy since 2022, with the current average being 266,000 new hires each month since June. This has helped keep the overall unemployment rate below 4% for the past two years, the longest level since the Vietnam War.

Data released Friday also showed that 303,000 new jobs were created in March, well above expectations. More than three-quarters of new jobs created came from the private sector, with average hourly wages declining slightly to an annual rate of 4.1%.

“With jobs and wages rising and inflation easing, Americans will continue to spend this year, bolstering economic growth,” said Bill Adams, chief economist at Comerica Bank.

While inflation remains stubbornly above the Federal Reserve's 2 percent target, wage increases have helped Americans, at least to some extent, combat headline price increases.

Related: Labor market report beats forecasts as red-hot job market confuses Wall Street

Daniel Casali, chief investment strategist at asset manager Evelyn Partners, notes that so-called nominal labor income, which combines wages, hours worked and the broader labor market, rose 6% in March compared to a year ago. That's almost double the inflation rate in February.

But what may be harder for Americans to overcome is the quiet rise in gasoline prices since last fall. According to the AAA Motor Club, the price of a gallon increased 6.6% and the national average rose to a six-month high of $3,582. Further increases could be seen as the US summer driving season begins.

The recent rise in global oil prices, increasingly sensitive to headlines from the ongoing Gaza conflict as well as Russia's actions in Eastern Europe, is likely to put gasoline prices back on the list of inflation factors and soften the Fed and U.S. Federal Reserve the market hopes on interest rate cuts in the summer.

Who needs the Fed?

But they may not be needed, according to Minneapolis Fed President Neel Kashkari. He told Pensions & Investments late last week that “the economy is going strong at the moment.”

The Atlanta Fed's GDPNow forecast tool, a real-time tracker of growth in the current quarter, expects the world's largest economy to expand 2.5%, following gains of 3.4% and 4.9%, respectively, in the third and fourth quarter of 2023. Both numbers exceeded economists' forecasts.

That an economy is growing at this rate while creating 266,000 new jobs every month with rising wages and slowing inflation is nothing short of astonishing.

Related: The Fed's influence on the stock market continues to weaken, as do inflation pressures

Whether you attribute this to the Biden administration's policies or consider the cost of last year's $1.7 trillion budget deficit may depend largely on your political affiliation.

The same goes for your thoughts on the impact of immigration, which has helped create more jobs and increase overall labor force participation while preventing wages from rising beyond the Fed's current comfort level.

Further economic analysis:

But what can no longer be debated sensibly is the question of whether the economy itself is doing well.

“Big fiscal policy is undeniably a positive force for current growth, and the addition of immigrants to the labor force has clearly boosted output and helped slow wage growth,” said Steve Wyett, chief investment strategist at BOK Financial in Tulsa, Oklahoma.

“Going forward, it will be a question of how long these factors can continue to provide a tailwind,” he added. “For now, they are allowing the Fed to patiently consider when to begin rebalancing monetary policy.”

The only question, it seems, is whether the “Vox populi” will reorient its opinion on the economy.

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