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A deep and enduring “vibecession” – Partisan differences are increasingly dominating perceptions of the economy.
By almost every metric, the US economy is doing quite well at the moment. There are many ways to evaluate economic vitality. The most obvious is the headline unemployment rate, which was used throughout the Great Recession to monitor the (slow) recovery. Today, though, unemployment is hovering near record lows at <4%.
Beyond this, there are somewhat nerdier, more technical measurements that still capture important aspects of the economy. Things like inflation, GDP growth, and the stock market. All of these indicators are somewhere between “good” and “great”. Inflation has come way down and is now around 3.7%. Core inflation, a better measurement of long-term inflation that excludes volatile commodities like gas prices, is even lower at around 2.5%, essentially hitting the Fed’s 2% target. GDP growth is surprisingly high for Q3 at 4.9%. The stock market is also doing fairly well, with the S&P500 being less than 10% off its all-time high at the end of 2021 and being well-above the pre-COVID high in Jan 2020.
Drilling even deeper, at this point you start to get the indicators people and the media can “fish” for in order to find bad news. Things like median wage growth, wealth inequality, and prime-age labor participation rate. The thinking with these metrics is that even if the more commonly cited stats are doing well, they might not paint a full picture. For instance, if the economy is growing but the rich are eating all the gains, then things like wage growth and inequality can show how most people aren’t benefitting. Likewise, if the unemployment rate has fallen because people have become discouraged and just don’t bother looking for work any more, then labor participation can show what’s really going on. The steelman of these metrics is that they can be helpful in painting a fuller picture, although in practice I’ve often only seen them used when people are willing to use motivated reasoning to paint the economy as underperforming (e.g. politicians, doomers, or the media just trying to create a story). That said, even by these metrics the US economy is doing well. Median wage growth is very high and is well-above inflation. Regular Americans are getting richer, and wealth inequality has fallen.. The prime age employment rate is also near record highs.
In spite of all of this though, many peoples’ opinions of the economy remain in the dumps. The consumer sentiment index has recovered only slightly from its record low a few months ago, but is still barely better than during the worst parts of the Great Recession. What gives? Well, there’s quite a bit of evidence that it’s just partisan emotional expression, i.e. “vibes”. There’s plenty of data showing that Americans tend to rate the national economy as being much worse than their own personal financial circumstances. Kevin Drum has some evidence that this national-personal split is mostly being driven by Republicans. 71% of Democrats and 57% of Republicans say the economy is doing well in terms of their personal situation. But in terms of the nation as whole, 58% of Democrats and just 5% (!!!) of Republicans say the economy is doing well on a national scale. So you have this goofy scenario where Republicans across the country say things are going well for them individually, but as a collective things must simply disastrous. Where is this “disaster” occurring? “Well, not here, but it’s surely happening somewhere”. The 5% mark is particularly interesting because it perfectly matches Republican’s approval rating of Biden. In other words, it seems like asking people how well the economy is doing is just a proxy for “what do you think of the current sitting president”. I’d doubt the numbers would correlate this perfectly all the time, but there’d still be a significant relationship. Whichever party doesn’t control the White House will see the economy in much more pessimistic terms.
Currently this is just applied to Republicans being pessimistic, but it’s almost certainly symmetrical. When Republicans eventually take back control of the presidency, it’s not hard to predict that Democrats will suddenly think the sky is falling in economic terms.
The metrics are gamed and don't really exist.
Inflation is "good" because it's not increasing as fast as it was -- it's still increasing after all. And the previous increases didn't go away. Not to mention that "core inflation" excludes housing and gas and food, as if home prices reaching unaffordable highs is some sort of triviality when The Economy Is Doing Great.
Unemployment is good because the numbers are gamed in a million ways. A typical pattern these last few years has been for employment figures to be "better than expected" when first announced, then quietly revised to much lower numbers a few months later. But it's always been a gamed figure, when people who stop looking for work are no longer counted as employed.
The economy is growing? Remember when they changed the definition of a recession because they didn't want to admit we were in one?
This latest media narrative is one if the most shameless I think I've ever seen. The economy must be doing well, because we've proclaimed it. And since no one believes us, we have to understand what's causing all this irrationality. Is this the dark undercurrent of the post-truth society Freud exposed by tapping into our deep inner pathologies? Are Republicans just that impervious to the truth? Sure, whatever you say I guess, your twelve inches are amazing President Biden, I must not be feeling it because I've been such a naughty boy.
Sometimes employment figures are later revised downward, and sometimes they are later revised upward, as was the case in October. Do you have any actual evidence that either is more common than the other? Because in 2022 most of the revisions were upward.
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No, inflation is actually decreasing. Peak inflation was in 2021.
They're still accounted for in LFPR.
You mean three years ago? Gdp has been growing every quarter since Q2'20 except for two.
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Yeah, it's literally impossible to square reported inflation numbers with the lived experience of watching housing costs explode 50-200% higher, rent explode 25-50% higher, or the prices of staple foods doubling. To whatever degree the CPI is or isn't a lie is besides the point. It's almost completely unrepresentative of how people are experiencing the cost of goods. I truthfully couldn't give a shit that flat screen TVs are cheaper. I'm not buying one every month.
The CPI measures the average price level of a representative basket of goods. It takes into account the fact that you buy food and pay rent more often than you buy TVs, so why would you take a small subset of the things it measures, notice that they've gone up more than the entire basket, and conclude prices have risen more than the CPI says?
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Well it's good that you said the term for me, because any 'lived experience' argument would get short shrift here if someone tried to use it on literally any other issue. But because this is an opportunity to shit on Democrats/the left nobody feels the need to have falsifiable beliefs anymore.
I think the real reason is because this lived experience is shared by a lot more folk than previous usage of the term and it is easily verifiable by a large amount of people.
It isn't verifiable though. It's anecdotes focusing on a tiny non-representative sample of the data. Who has actually collected the data in a proper way and is reporting much higher numbers than the government?
That is the issue in contention as I see it. And besides that I'm just explaining to you why the usage this time may be more valid than the claims of a few activists, if you think it isn't, well ok we agree to disagree.
Right from the bat I can tell you that's not the government, just the Rent/Shelter portion of the CPI is nonsense; so I don't really put much weight on the whole thing.
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"Housing costs" as defined in that link would be housing costs for someone becoming a homeowner for the first time. I agree that it's rough if you're a first-time homeowner but that's a pretty small slice of the population. Most people already have homes (so house price increases are good) and have fixed rate mortgages (so rate increases are irrelevant).
The rent chart you showed has rental prices increasing at about a 6-7% annual rate, which I agree is annoyingly high but doesn't seem catastrophic?
Staple foods are a pretty small share of people's consumption basket. (Food at home is about 4% of people's expenditures: https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/food-prices-and-spending/)
Ultimately you're getting at something correct, but I don't think in the way you meant it to be. There's a huge disconnect between what people think the economy is (that people mostly consume lettuce and mayonnaise and half of the economy are coal miners) and what it actually is.
Lies, damned lies, and statistics.
For starters, even your own source says the total amount of "Food at home" is 6%, plus another 6% for "Food away from home", making "Total food" 12%. Three times higher. And yeah, 12% of your budget jumping between 50-100% over the course of a single presidency is a pretty serious strain on the average household.
Same thing goes for rent. We aren't just talking about the last year. We're talking about the entire era of "Bidenomics". Coming up on 4 years of "only 6-7% inflation" makes for over 25% inflation total. If it had just been 2% we'd be looking at 8% inflation. That statistica link I shared, which now expects me to become a member god damnit, showed average rent jumping from ~$1000 to over $1300. To say nothing of how highly regional rent can be. In my area I had a buddy's rent jump up 25% in one year when he renewed.
If you own you aren't out of the woods yet. God help you if you have to move. If your family grows. If you divorce. If you need to move for work. It's no fun knowing if you have to move for any reason you can expect to pay 2x or more your current mortgage on a comparable home. You basically just got knocked off the housing wealth ladder completely.
This hasn't actually happened though. Yes, there are stories about the prices of specific food items suddenly jumping, but no one points the hundreds of things that didn't go up in price or that even fell, nor does anyone make note of when those prices don't jump.
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This number is simply wrong.
https://fred.stlouisfed.org/series/CPIUFDNS
This is more accurate. However, two things to note. Firstly, your quarrel here is not with Joe Biden but American planning law. Secondly, I wonder what happens when we compare nominal wages to average nominal shelter prices - as you can see, they track together since Q1 2021, except for the past few quarters, in which admittedly shelter has outpaced wages. However, it's only one, admittedly large part of the basket, and this is urban rents which one imagines have risen faster than average. So all in all, not convinced.
https://fred.stlouisfed.org/series/CUSR0000SAS2RS#0
This number is an exaggeration, but aside from that look at this graph. The increase is clearly well underway pre-Biden. This has nothing to do with Bidenomics. Once again, if you want to blame someone blame NIMBYs.
Edit; just realised I put the wrong graph in and I've lost the right one. But the rent one proves enough I think. Unless this is a statement about interest rate increases, in which case ok but 'I think the government is running too contractionary a monetary policy' is sort of directly at odds with 'I think inflation is too high and it's the government's fault'.
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Throw whatever food categories you want, the point is people spend a tiny amount of their income on food.
Yeah I mean landlords are famously slow and chunky while adjusting. Sorry that happened to a guy you know.
The point is people are out here talking like there’s some conspiracy to hide the fact that prices 100% higher than they used to be when in fact they aren’t and wages have increased along with the modest price increases.
All that aside, the following facts:
Really kind of gives away what’s happening, right?
12% is not, in fact, tiny.
CPI: Food was 271.271 in January 2021, it is 324.374 now, a 19.5% increase. It was 248.065 in January 2017, a 9.35% increase over the entire Trump presidency. All items CPI increase was 7.8% from January 2017 to January 2021; it is 17.1% over the January 2021 value now. Real disposable personal income was up 10.7% from January 2021 to February 2020 (at which point it goes nuts); it is up 5.2% since then. Real median household income, on the other hand, actually peaked in 2019 at $78,250 in 2022 dollars and dropped to $74,580 in 2022.
So no, prices aren't up 100% except in a few specific cases. But they're up a lot, and while real personal income has gone up, real household income has gone down.
You would have thought that, "besides, people don't really spend that much money on food, housing, and energy" was just dunking on dishonest economists, but alas...
To be fair the plurality of my spending is actually on taxes. But they want to raise those too.
The full CPI breakdown is here; it includes the weights. Food is weighted at 13.380%, which seems quite significant. Energy is 7.162%, which isn't nothing. Shelter is 34.749% which is large -- note that core inflation DOES include shelter, "supercore" is like "fetch", it's not happening. Flat screen TVs are 0.130%, so really don't figure much into it.
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Why are you so stuck on being wrong? 12% is not a tiny amount! It's trades for second or third place in spending categories behind housing and, often times, transportation.
The rhetorical dynamic is the following:
economists have thought really hard about how to measure inflation and have sophisticated data and tools to do it. They do their thing and say that year over year inflation is 4% or whatever.
weird zerohedge people notice that mayonnaise prices at target are higher by 75% and from this conclude that the federal reserve is lying about inflation.
I think people in #2 get confused because food is so important to live while flat screen tvs are not. So when food prices go up they think a lot of people must be about to starve. It’s useful to point out to these confused people that food, while necessary to live, is so cheap relative to Americans’ income that food prices can increase a lot and it doesn’t really matter. Hence headline inflation can be low even though mayonnaise at target seems expensive, and nevertheless headline inflation is the thing we should care about.
Not only do people not spend a very large portion of their incomes on food, but they spend an even tinier amount on mayonaise, and it isn't even necessary to live. My point being that people fixate on a few specific things whose prices have risen by a lot and ignore the many things whose prices have not risen by as much or at all.
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How is any of that a rebuttal to you being point of fact wrong about how much people spend on food, and how impactful food inflation is to them?
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There are a lot of economic data conspiracy theories out there but they can never point us to what data we're actually supposed to be looking at. What do you want us to consider aside from vibes and anecdotes? Anyway for your specific points:
There's a lot to discuss on why it makes sense to think about non-core or core for the purposes of various policy decisions and evaluations. Nevertheless they are both calculated and easy for people to look up, and they are usually pretty close. Incidentally non-core inflation was lower in September than core inflation. https://www.bls.gov/news.release/pdf/cpi.pdf
Since most people own homes this is in fact a good thing
Propose an alternate measure and defend it. The most obvious alternative that gets at what you're worried about is the labor force participation rate, which is also high and increasing. https://fred.stlouisfed.org/series/CIVPART. There are good reasons that this isn't the default measure but obviously the data is out there.
Yes, real output increased 4.9% year over year.
They did not, but anyway whether we're technically in a recession or not is an even coarser economic measure than GDP growth (which is doing very well) so it's not clear why people harp on this so much.
They went out and measured it, and the found out that unemployment is low, GDP growth is high, and inflation, however you measure it, is coming down. As I said you are free to come up with and defend your own measures but you should come to the table with more than vibes and anecdotes.
Republicans are doing a weird thing where they say their own situation is good but think that other people's situations are bad. It would be helpful to understand this phenomenon.
My understanding is that there's a similar effect under all governments, sometimes stronger and sometimes weaker. Dems criticized Trump for his economic policies, even though the economy was buoyant during his term.
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What do you want me to trust, gamed statistics? I put no faith in the officials who are knowingly conning me. Why do you?
I think it's a tremendous self-own if you have to reduce your personal experience in the world to "vibes and anecdotes". Do you need to read about your life in the papers before you know if it's good or not? The cost of everything has gone up tremendously in a few years, that doesn't stop being true just because two years have passed and high prices are the new normal so that the year-over-year statistic is "good".
Well yes that's just it -- inflation is still going up, it's just not going up as fast as it was before. We broke things, and then we fixed it halfway -- this is the glass-half-full economics success.
I wouldn’t mind finding some not-gamed ones.
Clearly, there are at least two camps of people in this thread. @Tomato’s situation looks pretty different from yours, which looks pretty different from mine. How else are we supposed to figure out which is more generally applicable, if not looking for stats?
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My economic life and the lives of everyone around me is incredibly good, so it’s useful for me to look at statistics to see how far-off people in different areas with different professions and backgrounds are doing. And when I look at the data it turns out they’re doing great too!
I don't know anybody who voted for Nixon!
You understand this is literally the argument you yourself are making when you suggest we operate off anecdotes and not statistics.
The statistics are all made-up, they are gamed for political purposes, believing them is worse than ignorance. Why would you put your trust in numbers that are lying to you?
In what manner? Please read this and tell me which specific elements of their methodology you question. Be specific.
https://www.bls.gov/opub/hom/pdf/cpihom.pdf
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"Statistics show things are not bad" -> "believe the anecdotes around you!"
"People are doing well around me" -> "no, not those anecdotes!"
Chadyes.jpg
I believe in the things happening to me way more than the things happening to you
Likewise!
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I genuinely don’t know what you’re looking for. People say they’re doing good. Dems think other people are doing good. Republicans, who also think they’re doing good, think other people are doing bad. I’m not sure who these other people republicans are worried about are but I hope things get better for them (in the minds of republicans!)
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