Job growth picks up, but Americans still think the economy stinks

  • If the healthy jobs picture is the foundation of a healthy economy, why do so many people still think things are terrible?
  • The answer is that inflation, while low in terms of its annual pace, is still more than most people can stand.
  • “Aggregate economic statistics sometimes don’t reflect what people are living day-to-day,” said economist Elizabeth Crofoot.

People fill up their vehicles at a Shell gas station in Alhambra, California on October 2, 2023.

Frederick J. Brown | Afp | Good pictures

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

If a healthy jobs picture is the foundation of a healthy economy, why do so many people still think it’s terrible?

Because the rent — food, gas and appliances — is still high. In a word: inflation, while low in terms of its annual pace, is still more than most people can stand and makes everything else look, if not terrible, at least less wonderful.

“You see all these high-level headline numbers, and those numbers don’t match your economic reality,” said Elizabeth Crofoot, senior economist at labor analysis firm Lightcast. “I don’t know if it’s right or wrong, it’s just people’s reality, and economic statistics sometimes don’t reflect what people live with on a day-to-day basis.”

The latest batch of good economic news came Friday, when the Labor Department said nonfarm payrolls rose 336,000 in September. That’s not all: Revisions for July and August added an additional 119,000 jobs, and the unemployment rate was steady at 3.8%. All in all, it was another stellar year for job creation.

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According to a Reuters/Ipsos poll, President Joe Biden’s economic approval rating is just 42%. Consumer and business sentiment has shown signs of improvement — the University of Michigan’s latest consumer survey showed confidence returning in late 2021 — but it’s still below where it was before the pandemic.

This is possible because prices are still at painful levels.

As an economist, Crofoot says the difficulty of causing high prices can be difficult to discern from macro data. As a consumer, she says she can feel it when she takes her two children out to dinner and sees that not only have the prices for the kids’ meals gone up, but the free drinks for them have been taken away.

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

From 2015-2021, about 10% of consumer goods were cut, while 4% were raised, According to the Department of Labor. Again, though, the data often doesn’t match the experiences, and the phenomenon of contractionary inflation — a product with less, the same, or a higher price — is getting worse.

“Consumers think they can’t win, and of course you’re going to feel bad about the economy because of that,” Crowfoot said.

It’s not just gas and groceries that make living expenses feel out of control.

Housing prices have soared due to the impact of Covid, pushing people out of urban centers and into the suburbs. The median home sale price has increased by 27% since the end of 2019.

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According to the National Association of Realtors, the average age of a home buyer in the United States is 36. At the same time, the share of income as a percentage of house prices is at an all-time high, according to government data dating back to 1987.

“Though millennials are the largest adult generation in the U.S., they have decreased their share of buyers in the market over the past year,” wrote NAR Deputy Chief Economist Jessica Latz. In a recent blog post. “This is contrary to what might happen because a large number of millennials have traditionally entered the market or at least are of family-forming age. This year, baby boomers have overtaken millennials.”

High cost is a problem. High interest rates are another, with 30-year mortgages running at an average loan-to-value ratio of 7.83%, according to the bank account. Financial markets are on the brink of the Federal Reserve taking rates even higher if inflation doesn’t cool.

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

Beyond housing costs, there’s some evidence that the jobs numbers aren’t all they’ve cracked up to be.

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

Real career advancement opportunities are hard to come by these days, and the Census Bureau shows a growing pessimism among teens and Gen Z cohorts, who worry about their future on an economic level.

“Inflation continues to be a major source of concern for young adults, and is compensating [Friday’s] Good employment news,” said William Rodgers III, director of the Economic Equity Institute at the St. Louis Fed. “That also may have increased their mental health concerns.”

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So even as good macro data continues to accumulate, higher prices will continue to act as an offsetting factor.

Although the consumer price index now shows inflation running at an annual rate of 3.7%, it is 20% higher than at the beginning of the pandemic. CPI numbers for September will be released on Wednesday.

“Prices are higher than they’ve ever been,” Crowfoot said. “So you’re spending more than you can save, so you’re going to have even more retirement than previous generations.”

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