Jobs are up but Americans still think the economy is bad


  • If a healthy jobs picture is the cornerstone of a healthy economy, why do so many people still think things are terrible?
  • The answer is inflation, which, despite being low in terms of its annual pace, is far more than most people can handle.
  • Economist Elizabeth Crofoot said, “Aggregate economic statistics sometimes do not reflect what people are living day to day.”

People pump gas into their vehicles at a Shell petrol station in Alhambra, California on October 2, 2023.

Frederick J. Brown | AFP | getty images

The US economy has added more than 2.3 million jobs this year, the unemployment rate is still below 4% and there are still about 10 million open positions for people 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 terrible?

That’s because rent – ​​including food, gas and appliances – is still very high. In a word: Inflation, which is trending downwards in terms of its annual pace, is still more than most people can handle and is making everything else look, if not terrible, at least less wonderful.

“You see all these high-level headline numbers, and these numbers don’t match your economic reality,” said Elizabeth Crofoot, senior economist at labor analytics firm Lightcast. “I don’t know what’s right or wrong, it’s just people’s reality, and overall economic statistics sometimes don’t reflect what people are living day to day.”

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

Yet President Joe Biden’s economic approval rating stands at just 42%, according to a Reuters/Ipsos poll. Consumer and business sentiment are showing signs of improvement – ​​the latest consumer survey from the University of Michigan shows confidence is back to where it was at the end of 2021 – but it is still well below pre-pandemic levels. Is.

This is possible because prices are still at painful levels.

As an economist, Crofoot says the difficulty high prices are causing may be hard to understand from macro data. However, 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 of children’s meals gone up, but their Things like free drinks have also been taken away.

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

According to the Labor Department, from 2015-2021, about 10% of consumer goods were reduced in size, while 4% were increased in size. Yet, data often does not match experiences, and the phenomenon of shrinking inflation – making less of a product, with the same or higher prices – is getting worse.

“Consumers feel like they can’t win, and certainly you’ll feel the economy weaken because of that,” Crofoot said.

It’s not just gas and groceries that are making it feel like the cost of living is out of control.

House prices soared after Covid, forcing people to move out of urban centers and to the outskirts. The average home sales price has increased 27% since the end of 2019, making homeownership especially difficult for young buyers like millennials.

According to the National Association of Realtors, the average age of a home buyer in the US is 36, the highest age since 1981. Also, the share of income as a percentage of house prices is at an all-time high, according to government data dating back to 1987.

“Even though the Millennial generation is the largest adult generation in the U.S., their share of buyers in the market was declining last year,” Jessica Lutz, NAR’s deputy chief economist, wrote in a recent blog post. “This is different than what might have been because the largest number of the Millennial generation are at the age when they traditionally enter the market or at least form a household. This year, baby boomers overtook Millennials. Have given.”

High prices have been a problem. High interest rates are another reason, with 30-year mortgages running at an average loan rate of 7.83%, according to Bankrate. Financial markets are concerned that the Federal Reserve may raise rates even higher if inflation does not subside.

“This has very significant implications for wealth creation,” Crofoot said.

Apart from housing costs, there is also some evidence that the number of jobs may not be as high as they should have been.

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

It’s hard to find opportunities for real career advancement these days, and Census Bureau surveys have shown that frustration is rising among teens and the Gen Z group, who are concerned about their future on an economic level.

“Inflation remains a major source of concern for young adults, offsetting [Friday’s] There’s potentially good employment news, said William Rodgers III, director of the Institute for Economic Equity at the St. Louis Fed. “This, too, may contribute to their increasing mental health crisis.”

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

While the consumer price index may show inflation now running at a 3.7% annual rate, it is nearly 20% higher than at the beginning of the pandemic. CPI numbers for September will be released on Wednesday.

“Prices are higher than they have ever been,” Crofoot said. “So you’re spending more than you can save, and so retirement is going to be more difficult for you than it was for previous generations.”

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