Massive Economic Disconnect: Americans Say They Hate The Economy But They Act Like They Love It
Something not added. And that has a lot to do with the nation’s first inflationary crisis in decades.
Simply put, the cost of living is going up and Americans are not happy about it. Inflation is overshadowing the real bright spots in the US economy.
“The economic news is generally good,” said Gus Faucher, chief economist at PNC.
“People say they don’t feel great about the economy – but they’re spending,” said Aneta Markowska, chief economist at Jefferies. “I just don’t quite believe what the trust reports are telling us.”
Ultimately, if Americans continue to spend, this trust issue will become more of a political issue for President Joe Biden – as opposed to an economic one.
Show confidence: Workers are quitting more than ever
Of course, it’s important to note that different people are experiencing different things in today’s economy – especially before all the shock waves caused by Covid. Some parts of the economy hit hardest by the pandemic, including the tourism industry, are still struggling to recover.
Despite concerns about a slowdown in summer hiring, the revisions show the government has significantly underestimated job growth between June and September.
The Labor Department ticked off its initial forecast with a total of 626,000 jobs for that time period.
At the same time, the record 4.4 million Americans quit their jobs in September, clear evidence of how much leverage workers have in today’s economy.
Biggest price spike since 1990
This is not to say that inflation is not a real challenge. That is.
Americans don’t like high gas prices, and they have a long history of blaming anyone in the White House, fair or not.
Wages are rising sharply amid a war for talent between companies. However, wages often do not rise enough to offset higher consumer prices.
Republicans and Democrats
America’s deeply polarized state may be fueling these inflationary concerns.
But politics may not tell the whole story here.
And consider that consumer sentiment among Democrats stands at 87 today. The number is only slightly better than the 80s low in early 2017 after former President Donald Trump took office.
‘Major shock to the system’
Another part of the problem is that many Americans have never lived through sticker shock before. Inflation has softened unusually over the past decade, to the point that many economists fear a Japanese-style deflationary spiral will be difficult to break out of.
“Inflation is something a lot of people haven’t experienced in their lifetime. It’s a huge shock to the system,” said Markowska, an analyst at Jefferies.
The irony about these inflation concerns: A big part of the reason inflation is here today is because demand is booming as the economy recovers from Covid faster than many imagined in March 2020.
Inflation won’t matter if the US economy is going through something like a slow recovery from the Great Recession.