Not The Facts

Americans think that the economy is terrible. That's strange -- because the data suggests things are pretty good. Paul Krugman writes:

Since December 2021 the U.S. economy has added almost six million jobs while the unemployment rate has fallen from 3.9 percent to 3.4 percent, a level not seen since the 1960s. And no, unemployment isn’t low because Americans have dropped out of the labor force: The percentage of adults either working or looking for a job has declined, but that’s almost entirely a result of an aging population, and labor force participation is right back in line with prepandemic projections.

To be sure, the return of serious inflation after decades of quiescence rattled everyone, and not just because it reduced real incomes. (Real wages fell during Ronald Reagan’s second term, but people felt pretty good about the economy anyway.) One benefit of low inflation is that it gives people one less thing to worry about; according to the American Psychiatric Association, inflation was a major source of stress during 2022.

But inflation, while still elevated, has come way down. The inflation rate over the past six months was 3.3 percent, compared with 9.6 percent last June. The price of gasoline, a major political talking point last year, is now more or less normal compared with average earnings.

And people have noticed. In October, 20 percent of Americans named inflation as the most important problem facing the nation; that’s now down to 9 percent.

So what's happening? Facts don't seem to matter:

The general rule seems to be that Americans are feeling good about their personal situation but believe that bad things are happening to other people. A Federal Reserve study found that in late 2021 a record-high percentage of Americans were positive about their own finances while a record low were positive about the economy. We don’t have results for 2022 yet, but my guess is that they’ll look similar.

A newly published study shows that who holds the White House has huge effects on views of the economy; this is true for supporters of both parties, although the effect appears to be about twice as strong for Republicans. The study also finds, however, that these changes in reported views don’t appear to have any effect on actual spending — that they reflect “cheerleading,” as opposed to “actual expectations.”

Beyond that, there’s good reason to believe that media reports about the economy have had a strongly negative bias. One thing that has gone really, really right in America lately is job creation, yet the public consistently reports having heard more negative than positive news about employment.

The propagandists are having a field day. Americans are paying attention to them -- not the facts.

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