- If a healthy employment environment is the cornerstone of a healthy economy, then why do so many people still think the situation is terrible?
- The answer is inflation, which, although its annual rate is falling, remains far higher than most people can bear.
- “Sometimes aggregate economic statistics don’t reflect what people experience on a daily basis,” said economist Elizabeth Crofoot.
People pump gas into their vehicles at a Shell gas station on October 2, 2023 in Alhambra, California.
Frederick J. Brown | Afp | Getty Images
The U.S. economy has created more than 2.3 million jobs this year, the unemployment rate is still below 4%, and nearly 10 million positions are open to anyone still looking for work. .
So if a healthy employment environment is the cornerstone of a healthy economy, why do so many people still think the situation is terrible?
That’s because the rent – as well as food, gas and appliances – is still too high. In a nutshell: inflation, which, although slowing from its annual rate, is still far more than most people can bear and makes everything else, if not terrible, at least less wonderful.
“You see all these high-level numbers, and those numbers don’t match your economic reality,” said Elizabeth Crofoot, a senior economist at labor analytics firm Lightcast. “I don’t know if there’s good or bad, it’s just people’s reality, and overall economic statistics sometimes don’t reflect what people experience on a daily basis.”
The latest round of seemingly excellent economic news came Friday, when the Labor Department reported that nonfarm payrolls increased by 336,000 in September. And that’s not all: the July and August revisions showed the creation of 119,000 additional jobs and the unemployment rate remained stable at 3.8%. This all adds up to another exceptional year for job creation.
Yet President Joe Biden’s economic approval rating is just 42%, according to a Reuters/Ipsos poll. Consumer and business confidence have shown signs of improvement – the latest University of Michigan consumer survey shows confidence returned to where it was at the end of 2021 – but remains well below its level of before the pandemic.
This is likely because prices remain at painful levels.
As an economist, Crofoot says the challenge posed by high prices can be difficult to discern from macroeconomic data. As a consumer, however, she says she can feel it when she takes her two children out to dinner and finds that not only have the prices of kids’ meals gone up, but things like free drinks for them have also been deleted.
“It’s the combination of inflation and inflation contraction,” she said. “As a consumer, you feel like you’re being diminished and diminished at every moment.”
About 10% of consumer goods were reduced between 2015 and 2021, while 4% were increased, according to the Ministry of Labor. But again, the data often doesn’t seem to match lived experiences, and the phenomenon of shrinkage – an increasingly cheaper product, with the same or higher prices – seems to be getting worse.
“Consumers just feel like they can’t win, and of course you’re going to feel depressed about the economy because of that,” Crofoot said.
It’s not just gas and groceries that make the cost of living seem out of control.
House prices have soared in the wake of the Covid crisis, pushing people out of urban centers and into outlying regions. The median home sales price has jumped 27% since the end of 2019, making homeownership particularly difficult for younger buyers like millennials.
The median age of a home buyer in the United States is 36, the oldest on record since 1981, according to the National Association of Realtors. At the same time, the share of income as a percentage of house prices is at its highest level ever, according to government data dating back to 1987.
“Even though millennials make up the largest generation of adults in the United States, their share of buyers in the market declined last year,” NAR deputy chief economist Jessica Lautz wrote in a recent article of blog. “This is at odds with what might happen since most millennials are at an age where they have traditionally entered the market or at least started a household. This year, baby boomers have overtaken millennials.”
Rising prices are a problem. Higher interest rates are another, with 30-year mortgages averaging 7.83%, according to Bankrate. Financial markets fear that the Federal Reserve could raise rates further if inflation does not calm down.
“This has very important implications for wealth creation,” Crofoot added.
Beyond housing costs, there is some evidence that employment numbers may not be what they claim to be either.
After all, more than a quarter of job gains in September came from lower-paid occupations in the leisure and hospitality sector.
Real career advancement opportunities are harder to come by these days, and Census Bureau surveys have shown growing desperation among teens and the Gen Z cohort, who worry about their economic futures .
“Inflation continues to be a major source of worry for young adults, offsetting (Friday’s) potentially good jobs news,” said William Rodgers III, director of the Equity Institute economic at the St. Louis Fed. “This could also contribute to their increased mental distress.”
So even as good macroeconomic data continues to flow in, high prices will likely continue to serve as an offsetting factor.
Although the Consumer Price Index currently shows inflation at an annual rate of 3.7%, it is about 20% higher than it has been since the start of the pandemic. CPI figures for September will be released on Wednesday.
“Prices are high compared to what they were before,” Crofoot said. “So you are spending more than you can save, and retirement will therefore be further away for you than for previous generations.”