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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.
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.
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.
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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