US Economy Is Good, Feels Bad – Why?

By Shlomo Maital

     The US economy is in good shape.  It has emerged from the COVID crisis and inflation, with low employment, reasonable GDP growth and strong wage growth (Ask the UAW workers). 

      But people don’t see it that way.  Public opinion thinks the economy is bad.  The Univ. of Michigan consumer confidence index was at 101 in February 2020, at the outbreak of COVID.  It feel to 70 during the pandemic.   And today?  It’s down even further, at 63.  It is a vice-cession (perceived recession).  Bad vibes, good economy.

       Why?

        The New York Times “The Daily” program featured Jeanna Smialek, Times reporter who covers the Federal Reserve.  She had two key insights.

        First:   Over the past three years, consumer prices have risen by an average of 20%.  On average, everything we buy costs a fifth more.  This happened fairly quickly.  For many, wages have not gone up as much.  So objectively they are poorer —  but even if wages did go up,  it still feels like we are losers, because each dollar buys so much less.

        Second: (and related):  Gasoline.  This is a key price.  Filling a tank with 15 gallons cost $38 in Feb. 2020.   Today it costs over $50.   We fill up with gas regularly, and each time, it is a reminder how much more expensive it is, and how much we are behind. (Note: Weakened demand has caused OPEC, led by the Saudis, to consider slashing their production, to keep prices high.  Thanks, guys). 

        In economics, reality is one thing, perception is another.  And they are diverging radically these days. 

        For Democrats, is there a remedy?  Doesn’t seem so.  Numbers don’t help.  And you can’t change history – which seems to drive perceptions. 

        Presidential elections are in another 11 months.  Will these bad-times perceptions change by then?  Doubt it.  Stay tuned.