This Guardian article about a Harris poll conducted by The Guardian on the US economy caught my eye, caused me to dig deeper, and try to unpack some things. I’m not an economist or economics expert but have grappled with economic topics enough over the years that I may have some insights, and of course encourage others to offer theirs.
Headline figures
I’ve simply copied and pasted these main points from the article, as it’s hard to reduce them further, and they have a lot to say:
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55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.
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49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.
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49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.
- Many Americans put the blame on Biden for the state of the economy, with 58% of those polled saying the economy is worsening due to mismanagement from the presidential administration.
The article does somewhat bury one of the ledes which is that Republicans feel much worse about the economy than Democrats, and put more blame on Biden, while offering the silver lining that Republicans are slightly more favorable to how they view “Bidenomics” versus a similar poll in September 2023. This heavily speaks to the tribalism of how information is delivered and processed in this country, as opposed to a real reality, though any shift within the right-wing misinfo-sphere does indicate that reality is seeping in.
Perceptions, “vibecession”, and Media Role
The headline results and their connection to an ongoing media narrative about a recession constantly being imminent, Republicans good at economy/Democrats bad, etc. is immediately apparent to me. The Guardian article talks about a “vibecession” where people feel like we’re in a recession even when we’re not, and the role of the media constantly hyping up every bit of bad news while a Democrat is POTUS has to be a significant factor. The “vibecession” exists in significant part because the media has put out the vibes, elements of the media have an aggressive agenda and speak to a siloed audience, and then reports that people have those vibes, in an endless feedback loop. The last recession occurred during the Trump administration during a global pandemic, and while that pandemic cannot be blamed on Trump himself, the confused, oft-delayed, and partisan response to it can be. In my unpacking of this topic I’ve found it quite clear that the Biden administration has overseen a very healthy correction of our economy after the disruption of the COVID pandemic, but it’s also fair to say that that correction wasn’t a perfect win-win for every single person, especially considering the oft unrealistic expectations of the lay voter.
Unmentioned Factors
What frustrates me about the way the “vibes” of the economy is discussed is how things like historically high inequality and the causes of that inequality barely get touched upon. Furthermore as I will discuss shortly, we’ve gotten used to a level of inflation that is unusually low and some sort of correction without endless inequality growth or a stagnant economy is inevitable. If the average American feels like economic indicators don’t represent the reality they live in, to reinforce the conclusion that economic indicators are untrustworthy is wrong; to seek better explanations is right.
Inflation and Growth in Context
In historical terms the inflation rates we experienced 2021-23 were quite high, reminiscent of the 1970s and even echoing the 1910s. But unlike those decades, this inflation rate has come and gone in two years and there aren’t signs it will sustain for a full decade; the average for the 2020s will almost certainly be much lower and closer to long-term averages. Furthermore that 2021-23 period came after two decades of below average inflation.
1913-2020 CPI inflation data broken out by decade
Referencing the 1913-2020 inflation by decade graph above, I wanted to note a few interesting things. Data is to December 31st of each year, and as noted on InflationData’s website, inflation was so high in January 1920 that shifting that single month to the previous decade makes the 1920s deflationary despite the “roaring twenties” being known for its hot economy. That’s because the 1920s were full of major headwinds for farmers and the poorer side of the economy, showing that while economic growth and inflation are not coupled, economic growth with low inflation or deflation is coupled with significant increases to inequality. However periods like the 1970s of wealth gains being widely shared corresponds to higher inflation, which as much as it hurts my progressive heart to say, makes sense that if everyone has more then more is inevitably worth less. The 1910s is an interesting case study because it also included a large global epidemic with major impacts, the flu epidemic, though that was also entwined with WW1 (see the “half spike” in the 1940s for WW2 and immediate post-war period). Lastly is that in the 21st century, we have gotten used to below average inflation levels. Which leads me to a brief foray into the inequality situation.
The Inequality Puzzle Piece
Reviewing a couple 2024 summaries on wealth inequality in the US from the Federal Reserve Bank of St. Louis, a quick takeaway to me is that in the Biden/post-COVID economy, wealth gains in a percentage basis are really picking up for people of color, people without degrees, and younger people and families. But despite these percentage improvements for these groups, the actual wealth gaps in dollars between the haves and have-nots continues to grow. These summaries don’t get finer-grained than the top 10%, but other data from the St. Louis Fed shows the top 1% have been averaging approximately 30% of the economy’s total wealth for the last decade, up from ~26-27% in the bulk of the 90s and 00s, which itself was up from about 23% in 1990. A similar graph for the top 0.1% shows their share of US wealth has increased from under 9% in 1990 to over 13% today. Combined with a media environment, whether TV or online, that often showcases the wealth and glamor of the rich more than the realities of regular people, it’s easy to see part of why people are feeling increasingly left behind.
Attempting to tie it all together
So with all this unpacking of things I found a lot of missing context, but also some truths, behind this “vibecession”. While current inflation rates are healthy and reasonable they are still higher than people were used to for twenty years before COVID, and it cannot be denied we are coming off of two years of historically high inflation rates. These inflation rates have a reasonable explanation, and in historical context look quite good given what our country went through 2020 to 2022, but that is not exactly the common understanding. While economists and wonks look at inflation as an ongoing rate, it seems clear the average voter and economic participant is more impacted by cumulative change over medium periods, which has been significant and doesn’t jibe with being told that the rate is down in the near-term or historically good in the long-term; if the rate isn’t negative, buyers will still feel that inflation has gone up, which it has.
Author’s annotations on inflation rate and US non-farm job graphs
The two graphs above were taken from The Guardian article linked at the top of the diary (original data from Bureau of Labor Statistics) and put in one image with my own annotations; the top is annual 12-month CPI inflation rate from mid-2016 to April 2024 and the bottom is US non-farm job numbers from 2000 to April 2024. Note the differing time scales of the two graphs. The three horizontal gray lines are three average inflation rates I thought meaningful; the 1913-2020 average of 3.1% (near identical to the 1990-99 average of 3.08%, a decade that many were fond of economically and a good living-memory reminder of a healthy and normal average), the 1920-2020 data discarding the high inflation of the 1910s is my own back of the envelope adjustment (hence the tilde of approximately 2.7%) and then the 2010-19 data representing our most recent pre-COVID “normal”. When combined with the understanding that the Biden economy is increasing wealth for people at the bottom and overall growth is strong, this near-term “new normal” of an inflation rate approximating the 1913-2020 average needs to be heralded as a success. As a progressive this analysis has made me take to heart the value of a more moderate stance, that inequality is still growing but that may be a necessary evil for good growth and increasing wealth for those who have the least. Perhaps to fight high inflation and tackle inequality, it is important to more directly subsidize the economic middle that often gets less because they are seen as “well-off enough”. Perhaps periods of high inflation are an inevitable result of making the economy work better for more people, or maybe a more thoughtful distribution of taxes, subsidies, and investment can smooth such periods out. It does show me that the sub-2% inflation we got used to before COVID cannot be combined with the economic growth that many want without having the wealth gap grow to harmful levels. And I’ve admittedly not gotten into topics like greedflation, rising insurance rates to grapple with climate change effects, or the increasing dominance of private equity markets on homeownership but I’ll mention them briefly at the end here because they are all factors as well.
What are your thoughts? Is there a sensible way down from inequality without making regular people feel pinched, and is there a good message to the average voter to help elect Biden and defeat Trump? I personally feel that the necessary and well-managed response to COVID deserves more praise and the message that we’re beyond the recovery phase and in the start of a healthy economic phase should be touted, but cannot deny that as much as the media fed a lot of the vibes of the vibecession with incomplete information to the public, the impact on real people is not totally made up and cannot be waved away. I appreciate user thoughts and anyone who took the time to read this!
