Why we hate rising prices more than we fear losing our jobs

If you listen to Americans now, you will think that when it comes to the economy, Joe Biden is the worst American president since Herbert Hoover. Each new poll seems to be worse than the last, according to the poll analytics website Thirty-fiveBiden has the lowest approval rating by any post-war president at this point in his presidency. Less than one in seven Americans thinks The country is on the right track, and most who believe it is on the wrong track seem to blame Biden.

Of course, we all know the main reason for this: inflation. American hate high pricesand in particular high gas prices, i.e. with inflation 9 percent and gas prices are floating around $4.50 per gallon Even after a recent drop, it was inevitable that Biden’s popularity would take a major hit. But a recent poll by CNBC, his latest All-America Economic Survey, suggests the President’s troubles run deeper. The poll showed, of course, that Americans were angry about inflation and Biden’s failure or inability to do anything about it. But it also included this confusing result: People for whom jobs were their top concern said they prefer republican Congressional control by a margin of 54 to 31. And that was more leeway for the GOP than for those for whom the cost of living was the number one concern.

This poll matches an amazing poll Global Strategy Group which was released back in February and found that 37 percent of respondents thought the US economy had done so lost Jobs in 2021, a historic year 6.6 million jobs were created; only 28 percent thought it had gained jobs. (The rest either didn’t know or thought the number of jobs hadn’t changed.)

You can see Job offers signs everywhere. Despite fewer people being in the labor force than before the pandemic, the unemployment rate is 3.6 percent — essentially what it was in 2019, that was the lowest level in decades – and the economy has more than gained 9 million jobs since Biden took office, in part because of the $1.8 trillion stimulus package Democrats passed in early 2021. Still, Biden and Congressional Democrats are getting almost no credit for the buoyant job market.

Given how low unemployment is and how high inflation is, you could normally think of this as a “best of times, worst of times” scenario. But Americans say it’s just the worst ever.

Some of it seems to be connected to something The Atlanticis Derek Thompson recently called “The everything-is-weird economy.” But a few other things are going on that help explain how Americans feel about the job market. The first is the argument that the 2021 stimulus was oddly too successful – it helped the labor market rebound so much that it made itself seem redundant. This is similar to what is sometimes referred to as the “paradox of preparedness” in crisis planning: actions taken to prevent or mitigate a crisis will end up appearing unnecessary if successful.

You can see this in comments today suggesting the employment recovery was inevitable and just a function of the end of the pandemic. But it wasn’t. If you go back to 2020, most projections for the jobs recovery have been bleak; Many economists expected the kind of slow, faltering recovery that we saw after the Great Recession. A survey of 45 economists by the National Association for Business Economics released in April 2020 forecast that the unemployment rate would still be 6 percent at the end of 2021. And the chief investment officer of JP Morgan Asset Management recommended that it could take a decade to bring the rate down to 3.5 percent.

In reality, the unemployment rate was about 4 percent end of 2021; it took just two years to get to 3.6 percent. Although some of that drop was the result of Operation Warp Speed, which got us vaccines sooner than most expected, the jobs recovery owes much to the Federal Reserve’s easy-money policies and the Democrats’ 2021 stimulus plan . But in the process, oddly enough, all those dire predictions were forgotten, and the public now associates the stimulus plan almost exclusively with high inflation, not low unemployment.

Additionally, as of 2020, something very strange was happening to Americans’ perception of the economy.

Historically, the unemployment rate has played a large role in how people see how the economy is faring, and in fact shaped their own well-being: understandably, when unemployment is low, people are much better off than when unemployment is high. (The inflation rate had a similar effect.) But a new paper by Darren Grant, an economist at Sam Houston State University, shows that since the pandemic began, that relationship has essentially disappeared and Americans’ views of the economy have largely decoupled from the unemployment rate.

It’s easy to see why this happened in 2020: Even as the unemployment rate soared, people viewed the economy more positively than usual as stimulus checks and additional unemployment benefits cushioned the effects of the downturn. But what’s interesting — and confusing — is that this disconnect continues while the job market recovers. Even accounting for inflation, the sharp drop in the unemployment rate hasn’t had much of an impact on people’s overall view of the economy.

The relationship between inflation and people’s perception of the economy has remained pretty much the same over the last 50 years. The relationship between unemployment and people’s perception has completely changed. The Biden administration has talked about jobs every chance it got, and the evidence of tight labor markets is everywhere. But few seem to care.

Some of this is a side effect of people’s anger at inflation. Some of this is likely a product of the fact that COVID just won’t go away. And some of this, as others have argued, has to do with the media’s relentless focus on inflation (although the media’s more interest in inflation than unemployment is nothing new).

Regardless, the key point is that Americans view the job market as irrelevant alongside inflation and gas prices. If the economy goes into recession and unemployment starts to rise again, who knows if this will remain the case? But what seems clear is that Democrats can trumpet the low unemployment rate all they want until inflation falls and stays low. Americans just won’t listen.

Leave a Reply

Your email address will not be published.