The recent arrival of another COVID variant and the familiar spikes in infections and deaths, after 2 years of pandemic, is yet more depressing. If Americans ever needed some good news, it’s now. And we have it, but it doesn’t appear to be cheering anyone up. As Bill Clinton once said: “It’s the economy stupid.” And it is.
Starting with the macro numbers, over the past three quarters, America’s real GDP increased at an annualized rate of 7.8%. Between 2000 – 2019, the average GDP was 2.2% and never reached 3%. The Federal Reserve projects 2021` will see an average of 5.9%. US disposable income grew 3% after inflation from January to October 2021. In 2018, the increase was 1.7% and in 2019, 0.5%.
And since January, unemployment has fallen by 1/3 and the Boston Globe reports (12/09/21 edition) that over the year now ending, lowest paid wages have increased by some 8%, but inflation gobbled up 5.5%. Bottom line, increase in wages is ahead of inflation, The Bureau of Labor Statistics announced that the job increase in November was 210,000, OK, but not extraordinary. However, the most impressive data point is that in the months since January, the economy, has added 4.5 million jobs, the largest number in any administration’s first seven months.
A curious result of recent Bureau of Labor Statistics polling doesn’t help much. The Bureau asks two different groups questions about the economy, Employers and Households and generally expects the two responses to be similar. Last month’s however, were not. Employers said economy was good to very good, while consumers, Households, said it wasn’t.
The public’s dismal sense of the economy, contradicts the standard measures as per above. Moreover, businesses are making huge capital investments which reflects confidence in the economy and its future, while consumers are buying at a high rate. Something they wouldn’t do if America was on the edge of recession.
So what is going on? First, rising inflation is frightening to many Americans who have gone through its negative personal impacts in the past, this despite the fact incomes are keeping pace. Second, there is considerable attention being paid in the media and on social media, to inflation. Much more than to the “Good News” economic statistics. Repetition eventually convinces people, inflation is a VERY BIG PROBLEM. Third, the price of gasoline, not Bureau of Labor Statistics reports, is what makes an impression.
And beyond this dull data, the hyper publicized Congressional decision whether to raise the debt ceiling and the familiar squeal that the NATIONAL DEBT WILL GO UP and the country will go bankrupt, doesn’t help. Given we finance our deficits largely from US debt instruments bought by Americans, the deficits/national debt shouldn’t induce panic.
Our economy is making an amazing recovery from the pandemic-induced crisis, much better than other major countries’.
We should be enjoying the holidays with our families and friends and not be seduced into unnecessary worry.
Tom Timberman is an Army vet, lawyer, former senior Foreign Service officer, adjunct professor at GWU, and economic development team leader or foreign government advisor in war zones. He is the author of four books, lectures locally and at US and European universities. He and his wife are 24 year residents of Kent County.