San Antonio Express-News (Sunday)
A close look at the economy reveals a glass four-fifths full
We all have a lot to complain about, I know, but once in a while we should count our blessings.
And according to the most widely tracked macroeconomics statistics at the national and state level, things are quite good right now.
In particular, low employment and receding inflation are worthy of our gratitude, even as poverty persists and affordable housing remains in woefully short supply for many people in Texas and beyond.
Unemployment
When it comes to putting people to work, I don’t know what to tell you except that the national unemployment rate, 3.4 percent in January, has never been this low in my lifetime — I’m 50. We must go back to 1969 to find unemployment this low and all the way back to 1953 to see unemployment below 3.4 percent. Most everyone who wants a job today can have one.
If you want to quibble — I see you folks quibbling in the back there — a narrative developed recently that unemployment statistics were artificially lower as a result of people who quit and stopped looking for work during COVID-19, referred to as the Great Resignation, and are not factored into the unemployment rate. Meanwhile, the United States’ overall productive capacity is diminished.
The problem with that narrative is that it’s demonstrably false. A record 6.74 million jobs were added in 2021, followed by the next-highest all-time annual number — 4.5 million — in 2022. The Great Resignation seems to be an anecdotal meme, not an economic trend supported by verifiable data. The fact is that more people work now than ever before, with the U.S. civilian labor force of 265 million at an alltime high.
The December unemployment rate in Texas, 3.9 percent, is down from the previous year’s 4.8 percent. Except for brief spikes in 2019 and 2020, this is also a more-than-50-year low in the unemployment rate in Texas.
In Texas, a booming energy sector and overall high employment has led to the state’s largest two-year revenue projection — $188 billion, a 26 percent
jump from the previous biennium, generating a $32.7 billion expected surplus. Unlike in some other years, the biggest problem the Texas Legislature faces is how best to deal with this massive budget surplus. My childhood home state of Massachusetts, with onefourth the population of Texas, sent residents tax refunds totaling $3 billion in 2022. Just saying.
If you want to further quibble, you could point out that when adjusted for inflation, aggregate wage growth has fallen since 2019 in almost every industry except retail and hospitality. That’s not pleasant for workers. On the other hand, it runs counter to the also mostly memelike complaint among employers that they can’t find workers to fill their jobs.
Inflation
Annual inflation peaked last summer at 9.1 percent, freaking everyone out, but it has plummeted with every passing month since July. The latest annual number from December was 5 percent.
About 80 percent of the credit for fighting inflation should be attributed to the Federal Reserve. The Fed does this through aggressively raising interest rates while demonstrating its independence from
political influence. Maybe 20 percent of the credit for inflation dropping should go to the U.S. oil and gas industry, which has raised production to record heights in the face of the Russian invasion of Ukraine. The U.S. is the largest producer of oil and gas in the world, and its ability to increase supply has decreased many major input prices in the economy.
The price of gas and used cars — key contributors to inflation last summer — have dropped 35 percent and 15 percent, respectively, since then.
I’m not trying to hype President Joe Biden, but there is the stubborn fact that the U.S. energy industry produced as much oil and gas in 2021 and 2022 as it ever did. Oil and gas production in Texas in 2021 and 2022 was also higher than ever.
The progressive wing of the Democratic Party obviously hates this, while the Bidenhating wing of the Republican Party also hates to admit it. Us folks caught in the middle who still drive combustion-engine vehicles and live in the messy and not-yet-sustainanble-energy world of 2023 need to face certain inalienable facts. Fossil fuel prices are relatively low because U.S. production is at a record high, which, in turn, has gone a significant way toward moderating inflation in the past six months.
And please don’t mention the cost of eggs as proof of anything regarding inflation. A vicious avian flu wiped out tens of millions of hens last year in the U.S., with a similarly documented scale of hen deaths in Europe and Japan. The surge in egg pricing is extremely temporary, and a profit-oriented competitive hen-raising industry will completely fix this in a few months, tops.
Inequality and housing
So what do we still have to complain about economically today?
The overall employment and inflation stats hide the poverty of many, and they miss the stagnant economy of many postindustrial and rural areas of the country. The fact that aggregate numbers are good does not mean that everyone is doing well. Clearly, many are not. The solutions to inequality are complex, and rest in tax policy and safety nets.
The cost of housing is probably the worst big-picture thing affecting the country. This is much worse in states and local regions with burdensome zoning regulations that hurt a market’s ability to build supply to meet demand. California, in that sense, is much worse off than Texas, as it has been for a while. But urban,
high-growth pockets of Texas have also seen prices spike as housing supplies haven’t increased fast enough to keep up with rising populations. The medium-term solution there involves making it easier to build new multifamily and high-density units in urban areas in Texas, as well as in any fast-growing metropolitan area in the country.
Do I give the Biden administration specific credit for record-low unemployment, a quick turnaround in inflation and massive expansion of the energy sector?
Not really, in the sense that presidential administrations are not particularly responsible for these things. As I said before, I give the Fed lots of credit for fighting inflation and the U.S. energy sector — with is flexibility — for doing its part.
At the same time, the Biden administration hasn’t screwed it up, not causing bottlenecks, and the U.S. economy has kept humming along nicely.
So remember to appreciate the good times while they last.