It is perplexing, at least on the surface. Polls on public confidence make depressing reading. Americans are far from optimistic. Yet the numbers on the economy reveal a robust recovery, in jobs, in consumption, in housing, in just about every economic gauge. Some have described this as a paradox. Most likely, the data and the survey respondents are looking at two different things. The data track the recent past. People have their eyes on the future.
The figures coming out of Washington’s statistics mill certainly are upbeat. Despite supply-chain problems, the economy created almost 6 million jobs between last January and November, some 700,000 in just the last two months. Unemployment as a percent of the workforce has dropped from 6.7 percent a year ago to 4.2 percent in November. 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 last two months. Retail sales are some 20 percent higher than a year ago. Manufacturers’ orders have risen some 22 percent from year ago levels, and lists of unfilled orders continue to expand, pointing to more activity in the period immediately ahead. American checking accounts, according to the Federal Reserve (Fed), 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.
And despite this good news, people are clearly worried and have become more so in just the last few months. A recent Harris poll reports that some 56 percent of Americans see the economy on the wrong track, a big change from last June when a similar poll indicated that only some 39 percent felt this way. Also, according to Harris, 57 percent of Americans see the economy as “weak,” up from 43 percent last June. The Gallop index of public confidence recently registered a value of -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.
Journalists have offered varied explanations for this difference between sentiments and the data. The New York Times claims that the data are faulty. According to the Times, all the usual statistics miss the empty office buildings, the need to prove vaccination status to get a restaurant meal, the bother of masks, all of which make the economy “stink” despite the usual measures. The Times has a point, but like so many New Yorkers, especially those at the Times, it confuses the city with the country, a much bigger place and largely free of these burdens.
A particularly pointed explanation from the Axios news feed finds fault with people’s ignorance. Here the reporter argues that people are out of touch with the news. Such attitudes toward the average American are common enough in journalistic circles and must make those who hold them feel comfortably superior. But it is a heavy lift for readers to believe that people who interact with the economy every day do not know how things are going, even if they do not have an e-mail feed from the statisticians at the Departments of Labor and Commerce.
A better explanation might consider that the data and those responding to the polls might be looking in different directions. It might consider that the public is well aware of the economic progress tracked by the data, even if the average Joe or Jane cannot quote chapter and verse from statistical releases. After all, what the Labor Department refers to as the “quit rate” – a measure of the percent of employees voluntarily leaving their jobs and a good gauge of how confident people are that they can find a new job – is near records. Some of this high rate may reflect the vaccine mandates or policies, but it also clearly shows how very aware people are about immediate opportunities in this robust recovery. But when people look further out on the horizon, they see, among other things, endless disruptions from policies ostensibly to deal with the next virus scare, they see inflation, and they see the potential pain imposed by government policies to deal with the scares and the inflation. None of this appears in the flow of data, but it is no less real for that.
Omicron is probably having the most immediate negative effect on the public mood. Quite aside from any fear of infection, and that, too, is real, people fear that it might spark a new round of lockdowns and quarantines. It has already halted much international travel. The average American has also learned in the past couple of 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 prices generally, but especially for groceries and gasoline, have soared, Washington dismissed the pain as “transitory.” While official Washington remained insouciant, people saw consumer prices rise at almost a 7 percent annual rate. The cost of living has outpaced 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 disproportionately on the least well off in society. The average American is not ignorant of these economic facts.
Still more capable of eroding public confidence are uncertainties about policy responses to the inflation. Since Washington now has admitted that the “transitory” description was misplaced, people know that some change in policy is likely. The Fed has already announced a gradual end to its practice of putting money into the economy through direct purchases of bonds on financial markets, what the Fed calls “quantitative easing.” If the inflation remains persistent, interest rate hikes will follow. The average Joe or Jane may not quote easily from economic theory, but he or she 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 will accordingly restrain economic growth. People are also aware that even as President Biden’s “Build Back Better” bill waits on a vote in Congress, the inflation will demand for less expansive and generous fiscal measures from here on out.
From this perspective, the country’s average citizen appears less ignorant and perhaps somewhat more insightful than the condescending explanations offered by some – though not all – media outlets. There is, as a consequence, no contradiction between the flow of statistics and people’s attitudes about the economy. People are well aware that things are going well enough, for now. They also know that further out on the horizon prospects look more problematic. The reporters and many commentators are looking at one set of facts. The public is looking at a broader picture, something a good deal more important.