The Daily - The Economy Is Good. So Why Do We Feel Terrible About It?

Episode Date: November 18, 2021

The U.S. economy is doing better than many had anticipated. Some 80 percent of jobs lost during the pandemic have been regained, and people are making, and spending, more.But Americans seem to feel terrible about the financial outlook.Why the gap between reality and perception?Guest: Ben Casselman, a reporter covering economics and business for The New York Times.Sign up here to get The Daily in your inbox each morning. And for an exclusive look at how the biggest stories on our show come together, subscribe to our newsletter. Background reading: American consumers express worry about inflation and are pessimistic about the direction of the country in general. But none of that is keeping them from spending.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. 

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, polling shows that Americans think the economy is bad. Economic data says they're wrong. My colleague, Ben Castleman, on the gap between the reality and the perception of the American economy. It's Thursday, November the flesh. I think we can shake hands. I think we can shake hands, yeah. Can we do this now? So good to see you in person. So good to see you in person.

Your hair. Yeah, this has been a pandemic experience. Pandemic ponytail. You know, my wife actually likes it. Yeah? Well, so she tells me. You put the word actually in front of it, so that suggests that she may be a minority. So, Ben, I think we should explain

that this is a rather momentous occasion, you and I sitting here, because this is the first time since March of 2020 that a guest and the host of The Daily have sat in studio for an interview for this show. It's been almost two years. You are that guest. I am truly honored.

Yeah. I have to tell you, it's a complete accident that you are the first guest. You didn't, like, plot this out months in advance? Like, the person we're going to have on first is Ben. It's got to be Castleman. No. No, I don't think it would have been you if we'd planned it. No, we're truly honored that you are the first person.

And it's a really happy accident. And I think it's incredibly fitting that we are very much still talking about the pandemic and the pandemic economy. And that is why you are here. It does seem like it fits the moment in many ways. Yeah. Okay, so Ben, we have always turned to you to explain to us in your very wise and plain spoken way what's actually happening with our economy. So in the simplest terms, what is happening in the American economy at this very moment?

So I think to put it very simply, the economy is pretty good right now, and Americans feel terrible about it. Which is what we call in journalism a contradiction. It's a bit of a conundrum. Right. So let's pick that conundrum contradiction apart. What is the evidence that the economy is doing well? What data support that claim? to the worst moments of the pandemic a year and a half ago, things look far better than any of us could have anticipated. We've regained something like 80% of the jobs that we lost in the pandemic. That's a lot. The unemployment rate is down to 4.6%.

People are making more money and spending more money than they ever have before, not just in the pandemic, but ever, ever. Ever in the history of the economy. Ever in the history of the economy. People are seeing strong wage gains by a lot of the sort of traditional measures that we use to ask how the economy is doing. It's coming back quickly and doing pretty well. Mm-hmm.

That's an even happier portrait of economic good news than I would have imagined. So let's zero in on the second half of the contradiction you articulated, which is that people are feeling bad about the economy. What is the evidence

for that, given the pretty happy-sounding economy you just described? On a basic level, we asked people. So, we have all of these surveys that have been going on for, in some cases, decades, asking Americans how they feel about the economy. The University of Michigan runs a long-running survey of consumer sentiment. By that measure, in early November, Americans' feeling about the economy was the worst in a decade. That means they felt worse about the economy now than they did in the worst moments of the pandemic in the spring of 2020. Mm-hmm.

Which is confusing. I mean, we had an unemployment rate that was close to 15%. We had an economy, Ben, that was shut down. That was shut down. Right. People felt better about the economy then than they do now. The Gallup poll has run this survey for a long time. They found 68% of Americans say that the economy is getting worse right now,

even though 74% say that it's a good time to find a quality job. So they say, I can go get a good job right now, but I still think the economy is going down the tubes. Right. And 68%, nearly 70% of people thinking the economy is going down the tubes is just an overwhelming majority of people being surveyed. It's the kind of number that we don't see in a lot of phrases.

You can't get Americans to agree on that kind of thing with any regularity. Now, I do want to be clear here, right? There is a strong partisan component to what we're seeing. And to some extent, this started as a partisan phenomenon. The moment that Joe Biden took office, confidence among Republicans plummeted. Right, their guy had lost, so they didn't like the economy of the guy who won. Absolutely. And confidence among Democrats rose.

But the recent decline that we've seen is bipartisan. Democrats, independents, Republicans, they're all saying that things have taken a turn for the worse over the last few months. Okay. So just to summarize, the people really do feel the economy isn't going great data. It's, according to public polling, real. It's widespread, and it's bipartisan. More Republican than Democrat, but now spread across both parties. So, Ben, how do you explain why this pessimism about the economy is so pervasive when the economic data that you just laid out

suggests in reality it's quite good. Why do people feel like they're being rained upon when it's actually pretty sunny out? So I think there are really two reasons. The first one is inflation. We are seeing a moment right now where consumer prices are rising at their fastest rate in more than 30 years. Consumer prices were up more than 6% in October from a year earlier.

And just to make clear what that actually looks like, if something was supposed to be $100, it's $106. It's real money. It's real money. It's not as a one-time standalone thing that huge. But if that continues over time, right, that starts to have a real impact on people's lives. And look, there are some things that are rising much faster. Gas prices are up nearly 50% over the last year. Now, that's partly because gas prices fell a lot in the pandemic. But still, if you were paying two bucks and something for gas a year ago, you're paying three bucks and something, in some cases, $3.50 or $4 in some parts of the country. That's a price that you probably pay all the time, and it's a price you see on the highway every time you drive down it. You're super aware of it.

Car prices. You know, I think back in the spring, we talked about how used car prices had jumped 10% in just one month, right? So, a car that cost $20,000 in April cost $22,000 just a month later. $20,000 in April cost $22,000 just a month later. Well, now that car would cost $26,000. Same car. Same car, on average, would now cost, you know, substantially more. Price of food is up significantly. Price of chicken and pork are up. Staples that people buy time after time. You're going to have to buy food in some form or fashion. You're going to have to buy gas if you want to get to work. These are things that people pay frequently, that they can't get out of, and they are rising by substantial amounts. So introduce us to the kind of person whose experience with inflation is making them feel worse about the economy, even if they're

benefiting from the positive forces that you described at the start of our conversation. Yeah. So I think that question actually highlights a really important point, which is that we're having this conversation in the aggregate, but people don't experience the economy that way, right? They experience it in very specific terms. And there are plenty of people out there who are not doing better. So, you know, imagine somebody who's got, you know, maybe it's a middle class family in Pennsylvania, got a long way to drive to work every day. Maybe the parents have gotten small raises this year, but not as much as inflation. They drive a lot, so they're paying more for gas. Maybe they needed to replace one of the cars, so they had to buy that car that suddenly costs more money. They've got a couple of kids, and so their grocery bills are high, and they're experiencing that. That family could very well be dealing with higher prices that are rising faster than any wage growth that they're experiencing. They could be sliding backwards. So for that family, right, there's

not really any conundrum here at all. But then there are these other people who are experiencing wage growth. Interestingly, right now, wages for the lowest earning workers are the ones that are rising the fastest. Retail workers. Retail workers, restaurant workers, right? Everybody where you hear, oh, we can't find workers, well, they're raising pay right now. So those workers are seeing wage growth

that is definitely faster than inflation. In a straight dollars and cents world, they are doing better now than they were a year ago. And so are they feeling better? Not necessarily. Right?

Some of this is the psychology of inflation. You see the prices going up and you say, well, I got a raise this year, but am I going to get a raise next year? And if prices keep going up like this, are my wages going to keep up with that? So even if in real dollar terms, this theoretical person we're talking about has more money than they did before, they're starting to experience a creeping fear that if chicken and beef and used car prices keep creeping up over time, that raise gets erased. I don't like this economy. There's a lot of psychology to this. Yeah, absolutely. Because with inflation, what you're seeing now makes you start to worry about

what's going to happen in the future. You see the prices that are going up right now, and you start to say, well, what if that continues? I'm going to end up worse. And all of a sudden, somebody who might otherwise be pretty optimistic about the economy suddenly starts answering that survey question, I feel pretty bad. I'm pretty pessimistic. We'll be right back. Okay, Ben, we're back. We're in studio. It's still pretty exciting.

It's still pretty exciting. You said, Ben, that there are two big reasons for the loss of confidence in the economy. And inflation was the first. What is the second? So the second one is that nothing quite seems to be working right now. You go to a store and not all the products that you can usually get are there on the shelf. Yeah, the shelves are sporadically bare. Yeah.

Now look, this is not you walk into a store and the shelves are empty. This isn't even like what we saw in the beginning of the pandemic where like you couldn't track down toilet paper anywhere. But I mean, the other day I went out to get butter for my wife to work on her wonderful pies. And there was no butter at the corner store. Now, look, I was able to go down to the other corner store and eventually I tracked down butter,

right? But I'm not used to going to the store and discovering that there's no butter. And you're not going to use margarine. Oh, please. Not for these pies. But that's happening all over the place. Or you go online to buy something and it tells you it's backordered for six months or you can't get the color that you wanted or the type that you wanted. And so then you go out to eat at a restaurant and you've got a long wait and the server seems frazzled and the kitchen messes up your order and you've got to bus your own plates, right?

Just in a lot of different ways, the level of service and the variety of products that we're used to getting are just not there right now. Okay. So Ben, as with inflation, I wonder if you can describe the person whose experience with this economic dysfunction is making them feel worse about the economy than perhaps they should if they're benefiting from higher wages, bigger savings, and so on. Let me give you a couple of examples. Take a parent with a young child.

We're in a major daycare crisis right now. It's very difficult to find slots in daycare or it's very expensive when you can find one. Because daycare is short-staffed? Because daycare is short-staffed. Because daycare is short-staffed, because some daycare centers shut down in the pandemic. So you can imagine a family, maybe they have perfectly good jobs. Maybe they're benefiting from that child tax credit that Congress passed that's helping them out. Financially, they may be doing okay right now, but they are paying way more for daycare,

or maybe one of the parents actually has to stay home, or maybe every three weeks, one of the parents gets a phone call saying, you've got to come pick up your kid because there's been an exposure and we're shutting down the daycare for the next week. And they miss work. And they miss work.

There are direct financial consequences to that. Right. But even aside from the direct financial consequences, it may just really not feel like things are working right now when you can't even get stable daycare, something that many people could count on before the pandemic. Okay. What's another example? Think about a restaurant worker.

We were talking earlier about how restaurant workers are seeing these big wage increases. Well, the reason they're getting those wage increases is it's really hard to find workers right now, which means that pretty much every restaurant is horribly understaffed. Right. All of a sudden, you're covering twice as many tables as usual, or you're covering, you know, twice as much on the line if you're in the kitchen than you used to. You're getting yelled at by customers. You're being forced to, you know, enforce a mask mandate or a vax mandate. Your day-to-day life may be miserable. And sure, you're getting a couple bucks an hour more maybe than you were before, but that may not

compensate you for how much worse your day-to-day existence is. Right. More money can only make you feel a certain level of happier with an economy if that economy is day in, day out, making you feel worse and worse about yourself. Yeah. And when we talk about this sort of contradiction, right, sometimes it can sound like we're saying, oh, well, you know, we know the economy is doing better if only stupid Americans understood how good the economy is right now. But that's not what we're talking about here, right? We're talking about things being actually palpably worse for those workers and those consumers. So maybe, Ben, the word contradiction is not quite right at all. It's not about good data, bad experience.

It's about perceptions and reality. And if your perception is that things are bad, then they're bad. And no amount of, like, economic reality data is going to change that.

That's not a contradiction. That's people just feeling bad. I mean, I think our data can only capture so much. And it can both be true that in dollars and cents, most people are doing better now than they were a year ago or even better than they were before the pandemic. And at the same time, that for many people, life is not great right now. And those two things are not necessarily contradictory.

So I want to understand the implications of this. Maybe this is a naive question, but how important is it that a lot of people feel bad about the economy? Is it something that we need to be all that worried about if the feelings are still a little bit untethered from the economic reality. I know that might seem like I'm now contradicting myself because I just said if your perception is bad, then it's bad. But maybe it's temporary. So how big a deal is it?

So I think that temporary word is the critical one. Because the real question here is what happens over the next six, 12 months. If you talk to people in the Biden White House right now, they are convinced that a year from now, the economy is not only going to be better, but it's going to feel better. Workers are going to come back as they feel better about the public health situation and probably as they run down some of the savings that they've built up and have to go back to work these supply chain shortages start to work themselves out which we're already seeing some signs of and we sort of look up in a little while and this felt like this very strange moment that we all lived through but the good stuff the jobs and the wages that's all still there and all the stuff that was making us, the jobs and the wages, that's all still there.

And all the stuff that was making us miserable, the inflation and the shortages and the understaffing. Disappates. Disappates. And if that's the case, then we're going to be sitting here in a year and saying, look at how great the economy is. If that's the case. If that's the case. If it's not the case. So the risk here really is that the longer that this lasts, the more embedded it becomes. And this is especially true on the inflation question.

So we were talking before about how inflation is all about psychology. Well, if people see a price increase one day, that may be relatively easy to dismiss. But as it goes on, people and businesses both start to say, well, this is just the reality we live in now. So a retailer starts to raise prices because they assume that the products that they're selling are also going to go up in price. Or workers start going to their bosses and saying, have you seen what's going on with inflation? You've got to give me a raise. And then the company says, well, all right, we'll give you a raise. But to cover that, we've got to raise prices.

Ah, in which case inflation. We get this cycle. Feeds inflation. And once that happens, and I want to be clear, we do not see much evidence of that happening so far. But once that happens, it becomes a very difficult cycle to break. So that's why it matters. The reason why it matters that people feel bad about the economy in this moment is that that psychology becomes normalized, built into the economy. People

respond to it in ways that actually make it even worse. That's right. Okay, so if you are a policymaker right now, you're on the Fed, you're on the White House, what tools do you have to make this better? Because it feels like specifically what we're talking about is fixing inflation, right? There's only so much anyone can do about the supply chain problems. And what you have identified as the biggest problem seems to be inflation. So can it be solved in a relatively short period? So this is the thing that is so tricky. Look, the Fed could control inflation.

But the way that they would control inflation is by slowing down the economy. By raising, we've talked about this in the past, interest rates, making borrowing a little more expensive, therefore just kind of dampening things. That's exactly right. But at a moment when the economy is still getting back on its feet, when we still have 4 million fewer jobs than we did before the pandemic, the unemployment rate for black Americans right now is close to 8%. There would be real consequences to slowing down the economy right now, potentially leading to people losing jobs, the unemployment rate going higher again. That is not something that the Fed wants to do. But they could do it. They could do it. But they also want to make sure that the economy stays on its feet,

and they're trying to walk this very narrow line to try to get inflation under control, keep the recovery on track, and we'll see how they do. So for now, with the Federal Reserve Bank reluctant to take that action, we're going to be living in this weird economic moment for quite some time, it sounds like. I think we know we're going to be dealing with a lot of these challenges into next year.

Beyond that, I think that's where we start to have real questions. And in the meantime, we are all going to feel perhaps not so great about the economy, perhaps worse than we should on paper. But I feel like the lesson of this interview, Ben, is that when it comes to the economy, the way we feel is everything. The way we feel is everything. Well, I feel this interview is over. And I want to thank you for being our inaugural return to office interview, Ben. It's been great being cooped up in a small padded office with you again, Michael.

Yes, a small padded office with not that much ventilation. I really appreciate it. Thanks so much for having me. So fun. Well, I guess that's it. I guess the worst part of this all is I now have to walk you out of a studio, make small talk. That's right. That's the best part of this all is I now have to walk you out of a studio, make small talk.

That's right. That's part of it. Just like, boop. We're done here. That's right. Okay. Bye, guys. I'm going to walk Ben out and make small talk with him.

Okay. Bye. Bye. Bye. We'll be right back. Here's what else you need. We'll be right back. narrowly voted to reprimand a Republican member of the body, Congressman Paul Gosar of Arizona, and strip him of his committee assignments for posting an animated video depicting him killing a Democratic colleague,

Congresswoman Alexandria Ocasio-Cortez, and assaulting President Biden. As leaders in this country, when we incite violence with depictions against our colleagues, that trickles down into violence in this country. And that is where we must draw the line independent of party identity or belief. identity or belief. Democrats, including Ocasio-Cortez,

said they felt obligated to speak out against threats that could once again inspire the kind of violence that occurred on January 6th when supporters of President Trump stormed the U.S. Capitol. It is inconceivable that a member of our community here would wish to repeat the violence of that dark day, that deadly day. House Republicans, all but two of whom voted against the punishment, called the vote a partisan attempt to silence one of their own.

For Democrats, this vote isn't about a video. It's about control. That's the one and only thing Democrats are interested in. Not condemning violence, not protecting the institution, not decorum or decency, just control. Today's episode was produced by Rachel Quester, Diana Nguyen, and Luke Vanderplug. It was edited by Lisa Chow and Mark George, contains original music by Dan Powell, Rochelle Bonja, and Brad Fisher, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for The Daily. I'm Michael Barbaro.

See you tomorrow.