News reports carry what seems to be a contradiction. Data show a good economic recovery from the lingering effects of pandemic-induced lockdowns and quarantines. Yet, all the polls announce that people worry about economic prospects.
The mainstream media, not surprisingly, explains this difference in terms of public ignorance. Such condescension may make reporters and commentators feel superior, but the public isn’t so blind as claimed. The difference might better be explained this way: The data looks at the present and the past, while the public is looking forward.
To be sure, the economic data does look good. Despite much-referenced supply chain problems, the economy created almost 6 million jobs between January and November, including some 700,000 in just the past two months. Unemployment, as a percent of the workforce, dropped to 4.2 percent in November from 6.7 percent a year ago. Hourly earnings have risen at almost a 5 percent annual rate, a pace not seen in years. New home sales have jumped 7.5 percent in just the past two months.
Orders at manufacturers have risen some 22 percent from year-ago levels, and lists of unfilled orders continue to expand, pointing to more activity in coming months. American checking accounts, according to Federal Reserve (Fed) data, have risen some 50 percent from year-ago levels, while household net worth has risen by a like amount since the early days of the pandemic.
Yet, measures of public confidence have dropped precipitously. A recent Harris poll shows that some 56 percent of Americans see the economy on the wrong track, a big change from last June when a similar poll reported that only some 39 percent felt this way. According to that same poll, 57 percent of Americans see the economy as “weak,” up from 43 percent last June.
The Gallup index of public confidence recently registered a value of minus 25, a huge difference from last spring’s positive reading. Some 40 percent of Americans say that this is a bad time to buy a home, the highest percentage since the early 1980s, when inflation was running high, and the economy was in recession.
Even in the face of upbeat data, this persistent public concern has obvious causes. For a start, people can see trouble in the new Omicron variant of the virus that causes COVID-19. They fear, not unreasonably, that it might spark a new round of lockdowns and quarantines. It has already halted much international travel. They have also learned in the past couple years that politics in Washington and state capitals could impel such lockdowns and quarantines even if the new variant does not require them.
And then there is inflation. For months, as the prices of groceries, gasoline, and other essentials soared, Washington dismissed the pain as “transitory.” While official Washington remained insouciant, people saw the cost of living outpace even robust wage gains so that most found themselves worse off than they were a year ago. And because the most severe price increases have occurred among essentials, the hardship has fallen most on the least well off in society. The average American is not ignorant of these economic facts.
Still more capable of creating public concern are the uncertainties about policy responses to inflation. Since Washington now has admitted that the “transitory” description was misplaced, people know that some change in policy is likely. The Federal Reserve has already announced a gradual end to its practice of putting money into the economy through direct purchases on financial markets, what the Fed calls “quantitative easing.”
If inflation remains persistent, interest rate hikes will follow. The average Joe or Jane may not quote chapter and verse from economic theory, but they can sense the direction of things and how the turn in Fed policy will make credit scarcer, will make bank loans and mortgages more expensive, and that these realities will restrain economic growth. They also are aware that even as President Joe Biden’s “Build Back Better” bill waits on a vote in Congress, the inflation will make for less expansive and generous fiscal measures from here on out.
So despite appearances, there is no contradiction. Things are going well enough now. People know that, but prospects nonetheless aren’t so bright. The reporters and many commentators are looking at one set of facts. The public is not ignorant of what the media see. Rather, it’s looking at something else that is perhaps a good deal more important.
