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The US economy is actually doing pretty well. But among working people who can cope with mixed messages and high prices, the prevailing sentiment is rather mediocre.
First, here are three new stories from The Atlantic:
I feel doubtful
“US. ECONOMY ESTIMATES 400,000 JOBS IN ONE MONTH: REPORT PROTECTS FEAR, Washington Post claimed last February… Job growth slowed sharply in April, raising concern, The New York Times warned… In June, the Journal warned that a soft landing could be threatened by consumers.”
One might assume the above headlines are from this year’s newspapers, but in fact they are over 30 years old. These were summarized – and speared – in a 1989 article in The New Republic entitled “The Sky Is Always Falling” in which Gregg Easterbrook argued that newspapers should read all business news, even seemingly positive developments (e.g. job growth ), present as bad news.
A similar trend can also be seen in many of today’s economic reports. In fairness, it often seems like the sky is about to fall, and for good reason: much of the recent economic news is obviously bad. But while inflation has been a beast, in some ways the economy is actually doing very well. Unemployment is low! America added jobs for 31 straight months! Consumer spending is high! Until recently, many economists and Fed officials were reluctant to celebrate these apparent achievements, fearing that a tight labor market and strong demand would lead to persistent inflation. (When it comes to economic data, seemingly all signs can turn out to be bad signs in hindsight.)
Consumers have also had a guilty conscience for some time. In June 2022, consumer sentiment hit an all-time low since the University of Michigan began measuring it more than 50 years ago. And a New York Times/Siena poll released this month found that only 20 percent of Americans think the economy is good or excellent. But sentiment appears to be improving: University of Michigan consumer survey data suggests consumer sentiment is trending higher this summer and is now closer to the average full-year outlook for the US economy (though not yet). all the way there). This metric is important because when consumers are confident, they spend more on goods and services — which in turn serve to fuel the economy, Joanne Hsu, director and chief economist at the University of Michigan Surveys of Consumers, told me.
In many ways, Americans’ muted feelings about the economy over the past year are understandable. Inflation is at its highest in decades, hitting many younger workers for the first time. And by late spring, hourly wages had risen faster than inflation for two years. Consumers feel poorer. “As an economist, I would say [the economy] is pretty good because I’m optimistic there will be further real wage growth,” Darren Grant, an economist who has studied consumer confidence, told me. But he added that as a professional whose spending power has been eroded by inflation, he understands why many consumers don’t feel the same optimism. (It’s worth noting that average real wages have been rising in recent months, and many workers actually made gains last year — particularly those who switched jobs.)
Perception also plays a part in consumers’ dubious opinion of the economy; As my colleague Annie Lowrey wrote last month, “Consumers tend not to notice when things are getting better and not when they’re getting worse.” A further compounding of negative perceptions is what she calls the wrong home problem, or the fact that so many people cannot afford to live where they want to live, which can add to the feeling that the economy is doing badly. And political leanings can also affect how people feel about how things are going (anti-Biden Americans may not be enthusiastic about embracing “bidenomics”).
The information environment in which we live is not conducive to fostering good spirits about anything, especially business. For more than a year, countless headlines have been warning that a recession is imminent. And consumers are inundated with information on social media that isn’t always accurate. Nearly half of Americans said earlier this summer they believed the country was in or about to be in a recession. Almost half! “The discourse surrounding economics is very different than it was over 40 years ago,” Hsu told me. “The proportion of people who said they heard bad news about inflation was much higher last year than it was in the ’70s and ’80s,” when inflation was higher. While the news environment isn’t necessarily at the root of recent negative sentiments about the economy, she said, it likely reinforced them.
Current economic history is characterized by mixed messages and mixed reactions. Grant explained that we are in a “middle zone” where people are watching some economic measures improve as wages catch up. Inflation is still not quite where the Fed wants it to be. At around 3.2 percent, however, it is significantly lower than last summer, when it peaked at over 9 percent. And in the second quarter of the year, the economy grew 2.4 percent, beating expectations. What the Fed and many economists are now hoping for is a growing, but not boisterous, economy. So far, the US seems to have managed to bring down inflation without mass job losses. This is rightly good news.
And as preliminary data shows, consumers are realizing that. “The public has a pretty good sense of what’s going on in the economy,” Grant said. “We should give them some credit.”
Related:
Today’s News
- President Joe Biden will travel to Maui Monday as the island continues search, rescue and recovery efforts following severe wildfires.
- A wildfire on the California-Oregon border, in the same area as a deadly blaze last year, has prompted evacuation orders.
- Despite Russian attacks, ships transporting Ukrainian grain have been able to pass through a Romanian NATO-protected lifeline.
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The Bizarre Relationship of a ‘Work Woman’ and a ‘Work Man’
By Stephanie H Murray
It started as a normal office friendship: we ate lunch together and joked during the breaks. Perhaps you’ve bonded over a shared affinity for escape rooms (or board games, bird watching, or some other slightly odd hobby). Over time, you learned the nuances of each other’s labor disputes. You’re now letting each other vent so regularly that the mundane frustrations of professional life have spawned a carousel of inside jokes that sour everyday life. You also chat about your life outside of work. But often you don’t need to talk at all; If you need to be rescued from a conversation with an overbearing colleague, a focused look is all it takes. They’re not Jim and Pam because there’s nothing romantic between them, but you can understand why people might suspect there is.
Read the full article.
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Katherine Hu contributed to this newsletter.
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