"Americans normally are happiest when the economy is growing rapidly. The unusual nature of today's recovery has upended that pattern.
Last year was the best year for job growth on record. Workers are commanding solid wage gains. Booming home and stock-market values have lifted household wealth to records.
But the record job growth followed record job losses in 2020, due to the Covid-19 pandemic and lockdowns. Inflation at 7.5% is eating up those wage gains for many Americans. And the unsettling effects of the pandemic, such as product shortages, are still playing out.
That explains why consumers say they feel as bad as they did in the financial-crisis year of 2009, a recent Gallup poll showed. For the first time, Americans who say they are "not too happy" outnumber those who say they're "very happy," according to a survey from the nonprofit group NORC at the University of Chicago.
Unlike the country's last big inflation bout in the 1970s and early 1980s, when price pressure built over a decade, this time a cost-of-living run-up unfolded in months. The pandemic has eroded faith in leaders and institutions, polling shows, even among some who are doing well.
"I'm lucky because I have zero debt -- I don't have a mortgage, I don't have a car payment, I don't owe a penny to the world right now," said Paul Remick, a retiree in Kingston, N.Y. Even so, he is among the many who are anxious about the economy's future.
"You listen to these Fed guys -- Powell right now. 'Oh, we think we'll get inflation under control this year.' Fine, but do you really think these food companies are going to lower prices once the supply chain gets settled?" Mr. Remick asked. "Do you think eggs are going to go down? These prices are here to stay."
President Biden is counting on strong growth, propelled in part by a $1.9 trillion Covid-19 stimulus law and a roughly $1 trillion infrastructure package, to boost his popularity heading into this year's midterm elections. His approval rating was down to 41.7% as of last Wednesday, from 52.7% last summer, in a poll average by the website FiveThirtyEight.
Confidence in the economy among independents, the voters most likely up for grabs, has fallen in February to its lowest since 2009, according to the University of Michigan index of consumer sentiment.
Public worries about inflation could increase the Fed's inclination to raise interest rates this year, to keep expectations of further price rises from becoming self-fulfilling. Economists say when households anticipate inflation, they are more likely to behave in ways that stoke it.
As late as last March, the Fed was projecting inflation would only reach between 2% and 3% for 2021. When prices rose quickly in the summer, Fed officials and the Biden administration blamed temporary factors. But inflation hit 7.5% in January. Prices also are rising faster than wages, which means people see their purchasing power slipping.
Mr. Remick in Kingston made a modest living as an administrative assistant for the county government. The 59-year-old has been plowing money into mutual funds and other investments since the 1980s and gotten a nice return, enough to allow him retire early a year ago while also collecting a modest pension.
Last summer, he had to wait four months for parts to fix his Kawasaki Ninja motorcycle. Then he saw what was happening at the grocery store. "I'm looking at the prices of food and they are skyrocketing," he said. "Four months ago I could buy a dozen eggs for 88 cents. Now I go there -- $1.60. They've almost doubled in four months."
Mr. Remick also worries that the asset boom is destined to crash as the Fed raises interest rates to curb the price trend. Though stocks have struggled in recent weeks, they are still up sharply over the past year.
In the late 1970s, Americans routinely cited inflation as the biggest or one of the biggest problems facing the country, in a time when gross domestic product was growing briskly, as it is now.
"GDP is a very abstract idea, whereas people can understand the concept of inflation and increasing prices," said John Sides, a professor of political science at Vanderbilt University.
While today's inflation hasn't hit double digits, as it did in 1974-75 and in 1979-81, with a peak of 14.6%, it is in some other respects more corrosive. It is accompanied and in part caused by product shortages.
Nazar Al-Jamie, a 62-year-old in Orange, Calif., owns an electrical contracting firm that employs three others. He and his wife, a corporate executive, each earned in the six figures last year. Yet, asked to assess the economy, Mr. Al-Jamie answers with one word: "Bad."
In November he lost two clients because of shortages of electrical panels needed for the projects. When he visits a supply store for things like light fixtures, he says, he often can't find enough.
He fears that inflation and shortages are here to stay. He worries about noneconomic things as well, such as crime and political polarization.
"Nobody in business likes uncertainty," Mr. Al-Jamie said. "We don't know what's going to happen to the supply chain. We don't know what's going to happen to inflation. We don't know what's going to happen with our sociopolitical stability in the United States."
Shortages are most acute in things people buy frequently, such as food. Some are available but in fewer brands, forcing people to ditch their preferred ones, said Joan Driggs, an IRI vice president.
When consumers settle on a brand, they want to stick with it, she said. For example, baby formula is an "emotional purchase" for many parents: "If they don't find the right size, if they don't find the exact match that they bought last time, they get frustrated."
Last March Mr. Biden, echoing the views of medical experts, predicted the pandemic would begin to fade by July 4. Instead, the virus has roared back twice, as the Delta variant and then Omicron.
The University of Michigan poll shows consumer confidence improved last spring but dived in the summer as inflation picked up and Delta emerged. Confidence had just begun to recover when Omicron knocked it back down.
Adrienne Arthur, a 44-year-old mother of two in Florence, Miss., owns a business designing jewelry. Before the pandemic, she sold at flea markets, shows and other gatherings. Then most of those events shut down. Nearly two years later, Ms. Arthur says, the coronavirus still leaves her struggling to find events to sell her jewelry.
"It will let up and then it will come back with something new," she said. For now, her family relies largely on her husband's income as a truck-fleet supervisor.
About three in four adults are "frustrated" and "tired" of the pandemic and believe most people will get Covid-19, according to a January poll from the Kaiser Family Foundation. More than half of adults, 56%, said they were more worried about the economy now than they had been during prior surges.
A January poll from Monmouth University found 7 in 10 Americans agreeing with the statement "It's time we accept that Covid is here to stay and we just need to get on with our lives."
Pandemic fatigue has blurred the benefits of a U.S. economy that has rebounded faster from 2020's drop than that of any other advanced nation. The unemployment rate, 4% in January, is approaching the 50-year low reached just before the virus arrived.
GDP grew 5.5% last year, the most since 1984, although measured against a Covid-depressed 2020. Output was about 3.1% higher, adjusted for inflation, in the 2021 fourth quarter versus the fourth period in 2019, just before Covid-19 struck.
Workers are quitting jobs in droves, often for work with better pay or flexibility. Economists estimate households have over $2 trillion more in savings than they would have absent the pandemic, due to factors like stimulus money and less spending on vacations, restaurants and such.
More than 2 in 3 Americans described their personal financial situations as excellent or good in a recent Quinnipiac University poll, yet nearly 8 in 10 described the economy as not so good or poor.
The damper on spirits from inflation and Covid appears to be magnified by the partisan lens through which many Americans see issues.
People's take on the economy is often intertwined with their view of the government, Vanderbilt's Mr. Sides said. When something bad happens, elected leaders can get blamed even if they were uninvolved.
Compounding these tendencies now is weakening trust in government. Voters' confidence in the government's economic policies recently fell to the lowest in nearly eight years, according to the University of Michigan poll.
Since the early 2000s, people's political preferences have tended to influence their view of the economy more than before, Gallup findings show. The gap between Democrats' and Republicans' view of the economy widened during the Donald Trump presidency, University of Michigan data show.
During the first year of the pandemic, Mr. Trump's last year in office, feelings about the economy fell sharply among both Democrats and Republicans, according to Gallup. After the Democratic Mr. Biden won, Republicans' views on the economy dived again, while Democrats' views picked up, Gallup data show.
Still, the slide in confidence crosses party lines. Ms. Arthur, the jewelry designer in Mississippi, is a lifelong Democrat who voted for Mr. Biden, but said she has lost confidence in him because of inflation. She said she considers him out of touch with the troubles that the pandemic and inflation have dealt to ordinary people, and is open to voting Republican in the midterms.
"The economy looks like we're going to be at a standstill for a while," Ms. Arthur said.
The moment reminds William Galston, a political scientist at Brookings Institution, of 1983, when he was issues director in the presidential campaign of Walter Mondale. That January, a Harris Poll showed the future Democratic nominee beating incumbent Ronald Reagan by 9 percentage points.
Twenty-two months later, Mr. Reagan won by 18 points. Mr. Galston attributes the reversal largely to the drop in inflation that year, along with rising wages and strong job growth.
"We haven't been in a period of inflation politics for 40 years," Mr. Galston said. "Inflation is not only an economic phenomenon, it's also a psychological one in politics, because it is a psychological proxy for things being out of control. And reining in inflation is seen as a sign that leadership, whoever it is, is getting life back under control."" [1]
1. Economic Boom Hasn't Raised America's Spirits --- Polls show that discontent is widespread. Behind it: inflation, shortages, pandemic
Mitchell, Josh. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 23 Feb 2022: A.1.
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