Discover more from Hopium Chronicles By Simon Rosenberg
It's Time for A Big Rethink on How We Poll and Talk About The Economy
The American economy is historically strong, and our workers are doing well
Last year Tom Bonier and I were able to come to a more accurate understanding of what was happening in the election by expanding the data we were looking at beyond polling to include things like special election performance, candidate fundraising, changing voter registration patterns, and eventually the early vote. This additional data gave us a more complete picture of what was happening in the electorate, one that also proved to be more accurate.
I think it’s time for political analysts to do this same data expansion exercise with the American economy to gain a more complete, and more accurate, understanding. For it’s my contention that like the “red wave” that never came last year, the prevailing narrative about the economy - struggle, decline, recession, Americans failing behind - is incomplete, or even wrong.
Let’s start this exercise by adding in some basic economic data:
The US unemployment rate today is 3.4%, the lowest peacetime unemployment rate since WWII, and the lowest since 1969. A majority of Americans alive today have never experienced an unemployment rate this low. The current Black unemployment rate, 4.7%, is the lowest ever recorded. The worker participation rate for prime age workers is now higher than before the pandemic.
In the last few months, America has experienced the lowest uninsured and lowest poverty rates in its history.
GDP growth is averaging over 3% in the Biden era, a very strong number. Our economic recovery from COVID is the strongest of all advanced economies. The Dow is up 24% since Election Day 2020, and is at the upper end of its performance over the past generation. Wage gains and new business formations are at historically elevated levels.
The current Atlanta Fed GDPNow forecast has GDP growth coming in at 2.9% this quarter. Job growth remains very strong - 253,000 last month. While things are slowing down, as we want them to be, we are not currently headed toward a recession.
Despite the enormous global disruption of COVID and the Russian invasion of Ukraine, the American economy is remarkably strong, people are working, their wages and incomes are rising, and fewer are uninsured than ever. But what about inflation? We will come back to that in a bit.
A recent cover story in The Economist, Riding High - Lessons from Americas Astonishing Economic Record, has this passage:
Yet the anxiety (as discussed above, the cw about the US economy) obscures a stunning success story—one of enduring but underappreciated outperformance. America remains the world’s richest, most productive and most innovative big economy. By an impressive number of measures, it is leaving its peers ever further in the dust.
Start with the familiar measure of economic success: gdp. In 1990 America accounted for a quarter of the world’s output, at market exchange rates. Thirty years on, that share is almost unchanged, even as China has gained economic clout. America’s dominance of the rich world is startling. Today it accounts for 58% of the g7’s gdp, compared with 40% in 1990. Adjusted for purchasing power, only those in über-rich petrostates and financial hubs enjoy a higher income per person. Average incomes have grown much faster than in western Europe or Japan. Also adjusted for purchasing power, they exceed $50,000 in Mississippi, America’s poorest state—higher than in France.
The record is as impressive for many of the ingredients of growth. America has nearly a third more workers than in 1990, compared with a tenth in western Europe and Japan. And, perhaps surprisingly, more of them have graduate and postgraduate degrees. True, Americans work more hours on average than Europeans and the Japanese. But they are significantly more productive than both.
American firms own more than a fifth of patents registered abroad, more than China and Germany put together. All of the five biggest corporate sources of research and development(R&D) are American; in the past year they have spent $200bn. Consumers everywhere have benefited from their innovations in everything from the laptop and the iPhone to artificial-intelligence chatbots. Investors who put $100 into the s&p 500 in 1990 would have more than $2,000 today, four times what they would have earned had they invested elsewhere in the rich world.
Ok, more data, lots more economic data showing the US economy is kicking ass and that we are far better off today. But why don’t Americans feel this progress, this success? Well, what if they do and we are just aren’t measuring it properly? Using incomplete and simplistic data?
Let’s start with a new comprehensive survey from the Conference Board on job satisfaction in America. Here it’s summary paragraph:
US workers have never been more content. Overall job satisfaction among US workers increased in 2022 to its highest point since The Conference Board began surveying US worker satisfaction in 1987. The largest gains occurred in “experience of work” components such as work/life balance, workload, and performance review processes. Satisfaction with compensation and benefits components including health plans, bonus plans, and educational and job training programs also significantly improved in 2022 compared to a year ago
Here’s their core graph:
Let’s drill down on the data a bit. Biggest jump - work/life balance. Wow, that’s really good. The other parts of it are also just not consistent with the everything is terrible narrative. These are big across the board jumps on stuff that matters.
Yesterday, Steve Rattner shared this mindblowing chart from the Federal Reserve:
This chart shows how we ask the question about the economy is important, and that like with the contentedness data above people are feeling pretty good about their own economic situation. They see a distinction between how they are doing and how the economy is doing. The data also suggests that we need to be doing more work on the impact COVID has had on our understanding of how we are all doing, and may still be doing so today. COVID was a collective trauma, a societal collapse of a sort, and it may take some time for us to admit to feeling good about where things are again overall, even if we feel better about our own individual stations. The drops we see need here to be better understood and explored.
Now - the role of inflation. I start with a few basic beliefs about the inflation we’ve experienced based on my work over the past few years:
Due to very rapidly rising wages, particularly for those in the bottom 50% of earners, the net impact of inflation on American workers over the past two years has been less than many have claimed.
The most serious part of the inflation we’ve experienced has been higher gas prices, which has disproportionately affected people in more rural settings, particularly those who drive fuel-inefficient vehicles. Simply, inflation has been less of an issue for those less dependent on driving and gas, and may explain why Republicans have viewed inflation much more seriously than Democrats for the last few years. It’s been a more serious economic event for Republicans than Democrats.
In polls which ask who is to blame for the inflation we’ve experienced, many Americans do not choose Biden, but blame supply chains, COVID, Russia/OPEC, etc. This, by the way, is an imminently reasonable position as inflation is a global phenomenon, and it is just a fact that Biden is only partially to blame. It means that those who argue that “the President is always to blame for the economy” in this case are wrong.
Here’s my way of putting all this competing data about the economy together:
the economy is historically strong, people are making more money and are content in their work, a recession is not on the horizon as of today, and inflation is too high.
If you leave out all that stuff in the beginning and just focus on inflation being too high the picture you are painting is incomplete, a distortion; and in this case, it’s also a red wavy parroting of right-wing talking points that benefits one of the two political parties over the other and is thus also not journalism or honest commentary. It should also be noted that if inflation was as bad as Rs have said Democrats would not have done as well in the 2022 elections, or in the early 2023 elections, as we have. It is clear people’s understanding of what’s happening in the economy today is far more than about #BIDENFLATION.
Let’s look at some new Navigator data to further explore this dynamic:
The issue of having a good job with high wages and benefits - arguably the single most important economic measure for workers - barely registers here because people are happy with their jobs, wages and benefits (lowest uninsured rate in history). The power of this measure in this poll is its absence, not its presence, and reinforces that the story we are seeing is one of economic success/contendedness plus inflation is too high, not only inflation too high. For fun, note that the number of Republicans, who have the most pessimistic views of the American economy, choosing the good jobs concern is ZERO. Guess the economy isn’t all that bad after all Speaker McCarthy!
A second chart from Navigator:
Only 26% of workers here are saying their job not paying enough is a major problem. Holy shit! It’s an incredibly low number, and another sign of this more accurate narrative I’m suggesting.
In a new analysis released this morning in the Washington Monthly, Why Don’t Americans Recognize That Inflation Is Down and Incomes Are Up?, noted economist Rob Shapiro makes the case that new economic data suggests “the inflation is too high” part of the narrative may not even be true any more:
For example, the latest data from the Bureau of Economic Analysis (BEA) shows that prices for consumer goods and services (technically, the “deflator” for personal consumption spending) increased an average of 0.2 percent per month in February and March of this year. On an annual basis, that comes to 2.6 percent inflation, or less than half the 5.6 percent rate in 2022. The BEA also reports that the inflation-adjusted disposable incomes of Americans per capita jumped 1.8 percent in the first quarter of this year, following two previous quarters of income progress. That is a sharp reversal of the 6.9 percent decline in 2022, driven mainly by that year’s inflation.
Economists know better than to trust one or two months’ worth of economic numbers. Still, other data covering the last four to nine months shows rapid disinflation and healthy income gains across the economy. According to the Bureau of Labor Statistics, household energy bills fell 4.1 percent from December 2022 to April this year, compared to a 6.6 percent increase for the same months in 2021-2022. Similarly, food prices climbed less than 1 percent from December to April, or 2.8 percent on an annual basis, compared to a 10.5 percent jump in 2022.
Gasoline prices rose by less than 1 percent from last December to April, compared to an 11.4 percent increase over the same months in 2021-2022. Prices for all durable goods—appliances, automobiles, computers, home furnishings, and so forth—also rose barely 1 percent from December 2022 to April, or 3.2 percent on an annual basis, versus price hikes of 10.5 percent in 2022. And businesses expect this sharp slowdown in inflation to last: A monthly survey by the Federal Reserve Bank of Atlanta found that from January to May, business expectations for inflation one year out averaged less than 3 percent…..
inflation increased by 0.3 percent in February and 0.1 percent in March, which, looking forward, translates into yearly inflation rates of 3.8 percent and 1.4 percent. But that’s not what most people hear about because the annual inflation rates reported by the BEA and media for any month are based on how much prices increased over the year that ended that month. That translates into annual inflation rates of 5.1 percent for February and 4.2 percent for March because both rates incorporate the high inflation back from the spring and summer of 2022.
……Overall personal disposable income, adjusted for inflation, jumped at an 8 percent annual rate in the first quarter of this year, following gains of 3.2 percent and 5 percent in last year’s third and fourth quarters. Much of that growth came from the extraordinary job gains under Biden since every newly hired worker adds to total disposable income. Over the last three quarters of healthy income growth, more than 3 million Americans found employment—nearly 1.3 million in the third quarter of 2022, another 853,000 in the fourth quarter, and 885,000 more in the first quarter of this year.
Even so, the real disposable incomes of Americans on a per capita basis also rose sharply over the past nine months, increasing at annual rates of 1.8 percent in the first quarter of this year on top of gains of 1.1 percent in the fourth quarter of last year and 0.6 percent in the third quarter. That comes to increases in real disposable incomes of 3.6 percent per person on an annual basis over the past nine months. That’s something for Democrats to crow about, given that yearly, inflation-adjusted income gains under Trump averaged 2.5 percent per person in 2017, 2018, and 2019. Setting aside 2020, when trillions of dollars in emergency federal aid artificially drove up the personal income numbers, the last time Americans saw real per capita incomes grow so strongly was in 1998 and 2000, when Bill Clinton was president.
Ok, that’s a lot to digest. Understand. I am still trying to make sense of it all too.
But here’s my basic plea - like what we learned with electoral analysis last year, those writing and studying the economy have to go deeper into the data and work a bit harder to get a more accurate picture of what is happening. The relentlessly negative representation of the American economy we hear about and is showing up in many polls is just not confirmed by economic data; other attitudinal data available to us also challenges this narrative; and when there is conflicting data like this then the foundational narrative cannot be counted on to be correct. And in this case, it isn’t correct. Like the red wave was wrong last year.
What is correct is this:
The American economy is historically strong; workers are doing really well and are content in their jobs; we are not headed towards recession; and inflation, a global phenomenon driven in part by COVID disruptions and Russia/OPEC, has been too high but is coming down to manageable levels.
Despite enormous challenges, Joe Biden has been a good President. The country is better off today. And because of this success, and the fear it means the President will be re-elected, Kevin McCarthy and Donald Trump are now trying to blow it all to pieces.
Let me know what you think of all this, and keep working hard all - Simon