Americans feel gloomy about economy despite falling inflation, low jobless rates
WASHINGTON (AP) — Inflation has reached its lowest point in 2 1/2 years. The unemployment rate has stayed below 4% for the longest stretch since the 1960s. And the U.S. economy has repeatedly defied predictions of a coming recession. Yet according to a raft of polls and surveys, most Americans hold a glum view of the economy.
The disparity has led to befuddlement, exasperation and curiosity on social media and in opinion columns.
Last week, the government reported that consumer prices didn't rise at all from September to October, the latest sign that inflation is steadily cooling from the heights of last year. A separate report showed that while Americans slowed their retail purchases in October from the previous month's brisk pace, they're still spending enough to drive economic growth.
Even so, according to a poll last month by The Associated Press-NORC Center for Public Affairs Research, about threequarters of respondents described the economy as poor. Two-thirds said their expenses have risen. Only one-quarter said their income has.
The disconnect poses a political challenge for President Joe Biden as he gears up for his re-election campaign. Polls consistently show that most Americans disapprove of Biden's handling of the economy.
Many factors lie behind the disconnect, but economists increasingly point to one in particular: The lingering financial and psychological effects of the worst bout of inflation in four decades. Despite the steady cooling of inflation over the past year, many goods and services are still far pricier than they were just three years ago. Inflation — the rate at which costs are increasing — is slowing. But most prices are high and still rising.
Lisa Cook, a member of the Federal Reserve's Board of Governors, captured this dynamic in recent remarks at Duke University.
"Most Americans," Cook said, "are not just looking for disinflation" — a slowdown in price increases. "They're looking for deflation. They want these prices to be back where they were before the pandemic . ... I hear that from my family."
That's particularly true for some of the goods and services that Americans pay for most frequently: Bread, beef and other groceries, apartment rents and utilities. Every week or month, consumers are reminded of how far those prices have risen.
Deflation — a widespread drop in prices — typically makes people and companies reluctant to spend and therefore isn't desirable. Instead, economists say, the goal is for wages to rise faster than prices so that consumers still come out ahead.
How inflation-adjusted incomes have fared since the pandemic is a complicated question, because it's difficult for just one metric to capture the experiences of roughly 160 million Americans.
Adjusted for inflation, median weekly earnings — those in the middle of the income distribution — have risen at just a 0.2% annual rate from the final three months of 2019 through the second quarter of this year, according to calculations by Wendy Edelberg, a senior fellow at the Brookings Institution. That meager gain has left many Americans feeling that they have made little financial progress.
For Katherine Charles, a 40year old single mother in Tampa, Florida, inflation's slowdown hasn't made it easier to make ends meet. Her rent jumped 15% in May. Over the summer, to keep her electricity bill down, Charles kept the air conditioning off during the day despite Tampa's blistering hot weather .
She has felt the need to cut back on groceries, even though, she said, her 16-year old son and 10-year old daughter "are at the age they are eating everything in front of them."
"My son loves red meat," Charles said. "We cannot any longer afford it the way we used to. The economy's not getting better for nobody, especially not for me."
Charles, a call center representative with a company that handles customer service for the Medicare and Affordable Care Act health plans, received a raise to $18.21 an hour two years ago. But it wasn't much of an increase. She doesn't even remember how large it was.
This month, Charles took part in a one-day strike against her employer, Maximus. She and her co-workers are seeking higher wages and more affordable 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 that a recent survey of its 40,000 employees found that threequarters of those who responded said "they would recommend Maximus as a great place to work."