WASHINGTON (`) — Inflation has peaked Lowest level for 2 1/2 years. The unemployment rate has remained below 4% for the longest stretch since the 1960s. And the US economy did repeatedly defied predictions an impending recession. But according to a series of polls, most Americans have a bleak view of the economy.
Inequality has led to confusion, despair and curiosity on social media and opinion columns.
Last week the government reported that consumer prices are rising didn’t rise at all from September to October, the latest sign that inflation is steadily cooling from last year’s highs. A separate report showed that while Americans… slowed their retail purchases Compared to the previous month, they are still spending enough money in October to stimulate economic growth.
Even so, according to a survey last month About three-quarters of respondents described the economy as poor, according to The Associated Press-NORC Center for Public Affairs Research. Two-thirds said their spending had increased. Only a quarter said their income had increased.
The split poses a political challenge for President Joe Biden as he prepares for his re-election campaign. Polls consistently show that most Americans oppose it Biden’s handling of the economy.
Many factors are responsible for the discrepancy, but economists are increasingly pointing to one in particular: the ongoing financial and psychological impact of the worst inflation in four decades. Despite the steady decline in inflation over the past year, many goods and services are still significantly more expensive than they were three years ago. Inflation – the rate at which costs rise – is slowing. But most prices are high and continue to rise.
Lisa Cook, a member of the Federal Reserve Board of Governors, captured this dynamic in recent remarks at Duke University.
“Most Americans,” Cook said, “are not just looking for disinflation” — a slowing of price increases. “They expect deflation. They want these prices to return to pre-pandemic levels. … That’s what I hear from my family.”
That’s especially true for some of the goods and services that Americans pay for most: bread, beef and other groceries, housing rent and utilities. Every week or month, consumers are reminded of how much these prices have risen.
Deflation – a widespread fall in prices – typically makes people and businesses reluctant to spend money and is therefore undesirable. Rather, economists say, the goal is for wages to rise faster than prices so that consumers still come out ahead.
How inflation-adjusted incomes have changed since the pandemic is a complicated question because it is difficult to capture the experiences of some 160 million Americans with just one metric.
Adjusted for inflation, average weekly earnings – those in the middle of the income distribution – rose just 0.2% per year from the last three months of 2019 to the second quarter of this year. according to calculations by Wendy Edelberg, Senior Fellow at the Brookings Institution. This meager gain has left many Americans feeling like they have made little financial progress.
For Katherine Charles, a 40-year-old single mother from Tampa, Florida, slowing inflation hasn’t made making ends meet any easier. Their rent increased by 15% in May. To keep her electric bill low, Charles kept the air conditioning turned off during the day in the summer, despite Tampa’s scorching hot weather.
She felt the need to limit grocery shopping even though, she said, her 16-year-old son and 10-year-old daughter are “at the age where they eat everything that comes to mind.”
“My son loves red meat,” Charles said. “We can’t afford it like we used to. The economy is not getting better for anyone, especially not me.”
Charles, a call center representative for a company that provides customer service for Medicare and Affordable Care Act health insurers, received a raise to $18.21 an hour two years ago. But it wasn’t a big increase. She can’t even remember how big it was.
This month, Charles took part in a one-day strike against her employer, Maximus. She and her colleagues are demanding higher wages and cheaper health insurance. Charles’ two children are on Medicaid, she said, because Maximus’ health insurance is too expensive.
Eileen Cassidy Rivera, a spokeswoman for Maximus, said a recent survey of 40,000 employees found that three-quarters of respondents said, “They would recommend Maximus as a great place to work.”
“Over the last five years, we have increased compensation, reduced healthcare spending and improved the work environment,” Rivera added.
Rising prices have been one of the main reasons for a wave of strikes and other forms of labor activism this year, including unions Auto workers, Wagoners And airline pilots to win significant salary increases.
Other factors also play a role in why many people are still dissatisfied with the economy. Political partisanship is one of them. With Biden in the White House, Republicans are far more likely than Democrats to call the economy bad, according to the University of Michigan’s monthly survey of consumer sentiment.
Karen Dynan, a Harvard economist who served in both the George W. Bush and Obama administrations, found that there are significant swings in economic sentiment after the inauguration of a new president, with the Voters of the party that opposes the president quickly shift to a more negative opinion.
“The partisan divide is stronger than before,” she said. “Partly because the country is more polarized.”
Yet many Americans like Charles still feel the pain of inflation. The national average price for a gallon of milk reached $3.93 in October, a 23% increase since February 2020, just before the pandemic hit. At $5.35, a pound of ground beef is 33% more expensive than it was back then. Average gasoline prices, despite a sharp decline compared to last year, are still 53% higher, averaging $3.78 per gallon.
All of these increases far exceeded the increase in overall prices, which rose nearly 19% over the same period.
Edelberg said the rise in prices of the items people typically buy most often helps explain why many people are dissatisfied with the economy — even as Americans remain confident enough to continue spending at a healthy pace.
“Their purchasing power is doing pretty well overall,” Edelberg said.
But comprehensive national data does not capture the experiences of everyday Americans, many of whom have not seen their wages keep pace with prices.
“The reality is that most people are probably pretty close to pre-pandemic levels,” said Brad Hershbein, a senior economist at the Upjohn Institute. “But there are many exceptions.”
Lower-income Americans, for example, have generally received the largest percentage wage increases since the pandemic. Fierce competition for frontline workers in restaurants, hotels, retailers and entertainment venues forced companies to raise significant wages.
But poorer people tend to face higher inflation rates, according to economic researchbecause they spend more of their income on volatile expenses like groceries, gas and rent – items that have absorbed some of the biggest price spikes.
“At the bottom of the income distribution, people got slightly larger raises,” said Anthony Murphy, a senior policy adviser at the Federal Reserve Bank of Dallas. “But I don’t think it compensates them for the fact that inflation was so much higher. They consume a different bundle of goods than the average person.”
Census Bureau surveys that Murphy and his colleague Aparna Jayashankar studied show that nearly half of Americans say they are “very stressed” by inflation, little changed from last year, even though inflation has risen since fell last year.
Even for people whose income has kept pace with prices, Research has long since found out that people hate inflation more than its economic impact suggests. Most people don’t expect their salary to keep up with rising prices. Even if this is the case, there may be a delay in receiving the higher payment.
“They’re obsessed with the fact that the prices they’re paying for the things that matter a lot – gas, groceries, grocery prices, rent – those things still seem high even if they’re not rising as quickly as they were.” said Hershbein.
“If everyone lost their jobs,” he said, “we would focus on that.”
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