Job growth is rising but Americans still think the economy stinks

Job growth is rising but Americans still think the economy stinks

  • If a healthy jobs picture is the cornerstone of a healthy economy, why do so many people still think things are so dire?
  • The answer is inflation, which, although trending downward in its annual pace, is still much higher than most people can afford.
  • Economist Elizabeth Crowfoot said: “Aggregate economic statistics sometimes do not reflect what people experience day to day.”
People pump gas into their cars at a Shell gas station on October 2, 2023 in Alhambra, California.

Frederick J. Brown | AFP | Getty Images

The US economy has added more than 2.3 million jobs this year, the unemployment rate remains below 4%, and there are nearly 10 million jobs open for anyone still looking for work.

So, if a healthy jobs picture is the cornerstone of a healthy economy, why do so many people still think things are so dire?

That’s because the rent — plus food, gas, and appliances — is still too high. In short: inflation, which, although trending downward in annual terms, is still far higher than most people can afford, it makes everything else seem, if not terrible, at least less wonderful.

“You’re seeing all these high-level headline numbers, and those numbers don’t match your economic reality,” said Elizabeth Crowfoot, chief economist at business analytics firm Lightcast. “I don’t know if there’s right or wrong, it’s just people’s reality, and overall economic statistics sometimes don’t reflect what people live day to day.”

The latest batch of seemingly great economic news came on Friday, when the Labor Department said nonfarm payrolls rose by 336,000 in September. And that’s not all: July and August revisions showed an additional 119,000 jobs were added, and the unemployment rate stabilized at 3.8%. All of this came on top of another excellent year in job creation.

However, President Joe Biden’s economic approval rating is only 42%, according to a Reuters/Ipsos poll. Consumer and business sentiment has shown signs of improvement — the latest University of Michigan consumer survey showed confidence back to where it was in late 2021 — but it remains far lower than it was before the pandemic.

This is likely because prices are still at painful levels.

As an economist, Crowfoot says the difficulty posed by rising prices can be difficult to discern from aggregate data. However, as a consumer, she says she can relate to it when she takes her two kids out to dinner and sees that not only have the prices of kids’ meals gone up, but things like free drinks for them have also been eliminated.

“It’s a combination of inflation and deflation,” she said. “As a consumer, you feel like you’re being nickel-and-dimed at every turn.”

About 10% of consumer items were reduced in size from 2015 to 2021, while 4% were increased in size, according to the Labor Department. But again, the data often doesn’t seem to match the experiments, and the phenomenon of shrinkage — less of a product, at the same or higher prices — seems to be getting worse.

“Consumers feel like they can’t win, and of course you’re going to be frustrated with the economy because of that,” Crowfoot said.

It’s not just gas and groceries that make it seem like the cost of living is out of control.

House prices have soared in the wake of Covid, pushing people out of urban centers and into more remote areas. The median home sales price has risen 27% since the end of 2019, making owning a home especially difficult for younger buyers like millennials.

The average age of homebuyers in the United States is 36, the oldest ever in data dating back to 1981, according to the National Association of Realtors. Meanwhile, income share as a percentage of home prices is at an all-time high, according to government data dating back to 1987.

“Although Millennials are the largest generation of adults in the United States, they had a shrinking share of buyers in the market last year,” Jessica Lautz, deputy chief economist at NAR, wrote in a recent blog post. “This goes against what could happen because the bulk of millennials are at the age where they have traditionally entered the market or at least started a family. This year, baby boomers have overtaken millennials.”

High prices were one problem. High interest rates are another matter, with 30-year mortgages running at a loan interest rate of 7.83%, according to Bankrate. Financial markets are concerned that the Fed may raise interest rates if inflation does not calm.

“This has very important implications for wealth building,” Crowfoot added.

Beyond housing costs, there is some evidence that job numbers may not be up to par either.

After all, more than a quarter of jobs created in September came from low-wage occupations in the leisure and hospitality sector.

Real opportunities for career advancement are becoming more difficult to come by these days, and Census Bureau surveys have shown growing desperation among teens and Generation Z, who worry about their economic future.

“Inflation remains a major concern for young people, which offsets (Friday)’s good employment news,” said William Rodgers III, director of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. “This may also contribute to their mental health distress.”

Therefore, even as good macro data continues to flow, high prices will likely continue to act as an offsetting factor.

While the CPI may show inflation at an annual rate of 3.7% now, it is about 20% higher than it has been since the start of the pandemic. CPI numbers for September will be released on Wednesday.

“Prices are higher than they were before,” Crowfoot said. “So you’re spending more than you can save, so retirement is going to be further away for you than it was for previous generations.”

    (tags for translation) inflation 

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