Americans Think the Economy Is Terrible. The Data Tell Another Story.
Jordan Weissmann joins to discuss why the economy is actually in a better state than most Americans and economic commentators think
By many measures, this is one of the best times to find a job in decades. And by many measures, Americans are locked in a state of extreme glumness about the country. Jordan Weissmann, Washington editor at Semafor, rejoins the show to talk about why the economy is much better than many Americans—and many economic commentators—think, and whether “Bidenomics” can fix what ails us.
In the following excerpt, Jordan Weissmann explains to Derek how many Americans’ negative view of the economy is contradicted by the data.
Derek Thompson: So according to Pew Research, the United States is currently mired in the longest period of “severe pessimism” in the history of polling. Most Americans think the U.S. is either in a recession or on the cusp of a recession, and most Americans have thought that for the last year or two. And it is important to point out that we have not been in a technical recession. And finally, you have this piece that consumer sentiment as measured by Michigan is downright depressed. I would say lugubrious. I know you’re a fan of big words, we’re going to go with lugubrious. You have two minutes to make the administration’s case that this economy is more impressive than most people think. Jordan, where do you start?
Jordan Weissmann: I don’t think it even takes two minutes. First point is just the unemployment rate, which is 3.6 percent. That’s about where it was in 2019, November of 2019, when Donald Trump was celebrating the health of the economy and its close to a 50-year low. And if I were the Biden administration coming up with their ad strategy, I would probably just do one ad after another just saying, “Did you know the unemployment rate is 3.6 percent? This is the best time to get a job in 50 years.” If you look at the employment rate for working-age Americans, people between the ages of 25 and 55, it’s higher now than at any time since April of 2001. The end of the dot-com bubble. I mean more Americans in their prime working years have a job than in a full generation.
And then you can kind of zoom out and look at international comparisons. Depending on exactly how you would measure it you could say that the U.S. is having the best recovery of any major economy in the world. In fact, I’m saying how would the White House make this case? They have made this specific point. If you look at the G7, the Group of Seven nations, the big developed economies, the U.S. has had the strongest GDP growth since the end of 2019. Essentially, it’s grown the most since the beginning of the pandemic. And at the same time, it currently has the lowest rate of inflation, if you measure it on an apples to apples basis, which can be a little bit tricky. But they use this thing called the Harmonized Index of Consumer Prices. So we’ve got the strongest growth, the lowest inflation at the moment, and an unemployment rate that is as good as it’s been in almost history.
Derek Thompson: I’m sure there’s some people there thinking “I don’t want this podcast to be a bought and paid for advertisement for and by the Biden administration.” So if you did have that thought, I set Jordan up to make the defense case for the Biden administration. And we’re going to get to the prosecution in just a second. But I want to hold on one of the points that you made, which is inflation.
I do think that it is easy, especially given the way that the media represents inflation, for the public to hold onto an impression of inflation that is a little bit old or a little bit trailing, I guess you would say in economic jargon. One year ago, or at least 13 months ago, the 12-month inflation rate was like 9, 8.5 percent. Very, very high. Today it’s approximately 4 percent. So inflation has come down a lot in the last 12 months in a way that I don’t think media representations have exactly put their finger on.
Jordan, help us understand: Why has inflation come down so much in the last year?
Jordan Weissmann: Well, part of it is what economists just called base effects, and so this is the nerdy part. If we’re talking about the 12-month inflation, inflation was going really, really fast a year ago. It was spiking, prices had already gone up a bunch. And so if you’re measuring against that point of comparison, when prices had already gone up a ton, inflation has slowed down a little bit as a result of that. It’s hard to keep up that pace. And so it’s just partly the fact ... it’s your frame of reference is doing a little bit of the work there.
At the same time, we’ve benefited from the fact that energy prices aren’t spiking the way they were, gas prices aren’t quite as out of control as they were at the beginning of the Ukraine war, for instance, that energy has dealt a huge blow in Europe, which we haven’t gotten quite the same brunt of that. Then you don’t have the spiraling cost of manufactured goods, of used cars and new cars and furniture that you’re trying to buy. All the stuff that got caught up in the supply chain crisis that kind of followed the immediate aftermath of COVID. Those kinds of issues have been resolved a bit. So a lot of those kinds of things that were causing that huge, huge, just epic 40-year-high inflation, that’s all kind of faded a bit.
At the same time, before I was putting on my Biden’s spokesman hat there. It would be premature to say that inflation’s back to normal, if you look at the month-to-month rate, if you look at core inflation—which takes out food and energy prices, it’s what economists really like to look at because it’s the less volatile stuff, less affected by commodities—that’s still kind of at a high simmer. It’s almost boiling. It’s still bubbling along there, sort of around a little bit over 4 percent annual rate, which is higher than the Federal Reserve would like. It depends on exactly which measure you look at. But core inflation is also not quite back to normal. And so it’s premature to declare victory, but certainly inflation has been coming down. A lot of the factors that people thought would be temporary, have turned out to be temporary.
This excerpt was edited for clarity. Listen to the rest of the episode here and follow the Plain English feed on Spotify.
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Host: Derek Thompson
Guest: Jordan Weissmann
Producer: Devon Manze
Subscribe: Spotify
