People are extremely upset with Joseph R. Biden because lots of things seem especially bleak at the moment. One of the key ones being that things are expensive. Grocery prices are so much higher than they used to be, and other items have followed suit. However most of our inflation metrics have declined and are currently stable. In fact, MANY economic metrics look pretty overwhelmingly positive.
The 2020 numbers skew the chart a bit, but economic growth measured by gdp is the best it’s been since 2021 and the rate of improvement is growing.
Wages are way up too, showing larger growth than we’ve seen potentially in decades.
Employment is up. Prime age employment is at or above where it was prior to the pandemic, which are historic highs.
Despite these numbers, people still do not believe that the economy is good. According to the University of Michigan consumer sentiment remains at very low levels.
And This CNN poll shows the same
There has been quite a lot of consternation around this online. Some have been claiming that the issue is messaging, while others attribute it mostly to inflation/costs. Will Stancil has been on a weeks long quest to convince people that the issue is primarily because of people’s media diets. More on that a bit later.
Here I want to explore some of the consumer data and see if we can develop an interpretive lens by which we can understand what's going on. Let's start with inflation. Did inflation stop?
Yes, inflation has definitely returned to normal-ish levels. The very high inflation that we saw last year is pretty much over and prices have stabilized in many markets.
But people still feel like inflation is a big problem that needs to be solved. We know that inflation isn't happening like it was, so the next question is whether there is anything driving that belief.
In totality the cpi is still rising month over month. However, there are individual commodities that actually saw prices DECLINE relative to last year, and certain items are still high.
Ground Beef
Chicken Breast
Eggs
Milk
Bread
People talk about groceries a lot because it's something always on their mind. And people feel like food is more expensive because food is more expensive than pre-pandemic levels. Your grocery basket this year is probably cheaper than last year at this time. But it's higher than it was 4 years ago!
And yes, 2019 was 4 years ago.
Happiness is a function of expectations. It's possible that people are still expecting process to be what they were 4 years ago. They aren't. They won't be. But we still see people complaining about high prices because prices are higher than they expect and higher than they want them to be.
According to the New York Federal Reserve people expect prices to go up next year, but not as much as last year.
It's also interesting to point out how this impacts our media diet. Tiktok is filled with people complaining about how groceries are more expensive. But I noticed there are a ton that are comparing prices today to prices from a few years ago to play into these inflation anxieties.
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And the mainstream media keeps talking about how expensive things are.
Backing this up is that young and old alone share really similar levels of inflation expectation in the next year, with younger cohorts actually expecting lower inflation in some measures. No one cohort really has a super positive view of the future. So while I respect the Lord’s work Mr. Stancil is putting in recently to make people realize that people's economic narratives don't match reality, I don't think Tiktok is really pushing a narrative all that different from the mainstream outlets.
And I don't think it's entirely without warrant. Things ARE more expensive, even if the rise in prices have either slowed down or reversed for some items. Of course most people can still afford groceries. They can even probably do it better than they could last year! But instead of contextualizing this information our media has decided to focus on the fact that people are paying more than they were a few years ago.
But a video or article showing you that grocery prices are back down seems less likely to go viral than one that shows the shocking prices at whole foods.
There is a sense in which people are both right and wrong: Although we shouldn’t be reductionist about it, people really are upset that things cost more than they used to. But I think people are comparing prices to well before the pandemic rather than what things were last month or even last year. And all this is amplified by a media narrative that reinforces the belief that costs are out of control.
An interesting addendum to this would be to do the same but with housing costs. That seems to be the big other piece of the cost pie, but I was already rambling too long and had too many screenshots to add here.
I think a big part of the sentiment about prices right now is *where* the increases are coming from. The start of the pandemic had all kinds of disruptions in the food system and supply chain, so we sort of understood prices and inflation going up. Then, the narrative was that wage increases were driving prices. What's the narrative now? The only thing left is corporate profits, really
In the aggregate, wages are up, and inflation is down. Cool and good. I am glad the macro indicators look better. We all like seeing that.
In my personal life, my wages have been stagnant for ten years and have lost ground even relative to 2019 inflation, never mind now. I know others have made significant gains, but wage gains are not evenly distributed across the economy. I also don't see how you look at those grocery charts and propose that people's calibration point is pre-coronavirus. The spike from 2021 to now is a lot sharper and more persistent.
The wonks can keep saying, "no, it's the children who are wrong," and point at macro indicators, but a pound of ground beef is still two bucks more expensive where I am than it was in 2021. I have to buy groceries weekly, so those prices are salient to me. "You can still afford groceries," you may say, but every dollar I'm spending there is not going into other parts of the economy.