The Plan is Working...Why Doesn’t America Know It?

In the past week, we’ve seen new statistics illuminate just how successful the economic recovery from the COVID-19 pandemic has been.

• Unemployment: The unemployment rate is down to 4.6% after a 6.7% pandemic high AND is expected to be at 3.5% by the end of the year, which will be the lowest in 50 years.
• Jobs: Job growth between June and September was underreported by 626,000 jobs, meaning those depressing reports a few months back were actually really strong.
• Retail Sales: All those people saving during the pandemic are ready to spend! Retail sales are 16% higher than last year.
• The Stock Market: The stock market has grown over 100% since March 2020. (friendly reminder, the economy does not equal the stock market)
• GDP: J.P. Morgan has upgraded its growth expectations in Q4 from 4% to 5%.
• Infrastructure: The government is about to invest $1.2 trillion on our roads, bridges, trains, clean water, and broadband after President Biden signed the Bipartisan Infrastructure Bill into law on Monday.
• Child Poverty: The Child Tax Credits have provided much-needed relief to families. In fact, these stimulus checks have lifted 8 million people out of poverty.

*Now, I don’t want to ignore the millions of low-income workers struggling, the drop in the female workforce participation rate, and the supply chain woes. There is real hurt happening in this country and the pandemic recovery will take time.

With that caveat, this kind of recovery is extraordinary! Who would have predicted that the unemployment rate would be below 2019 after less than 2 years of COVID? Definitely not economists! Without focusing on beating the virus, would we even be here with another president (who shall remain nameless)?

But you wouldn’t know that from how the news has been covering the economy lately.

Americans Fear What They Hear

Inflation….inflation...inflation.

If you are a human living in the United States, you have probably heard those words in the last month. The news is freaking out. Who else saw the CNN segment on a family that buys 12 gallons of milk a week?

Setting aside the mental math (and health implications) to figure out how 11 people drink 12 gallons of milk a week, the headlines on inflation have been dire at best and apocalyptic at worst.

But the thing with inflation is that not all inflation is created equal. Inflation is based on the Consumer Price Index which is an aggregate of the prices of common goods like milk, clothing, transportation, and medical expenses. When some goods rise drastically, like say rental cars due to an unprecedented pandemic disruption, then the CPI rises.

And that appears to be exactly what is happening. The types of goods that have the highest inflation rates are directly related to the pandemic recovery: rental cars, used cars, hotel rooms, furniture, etc.

It’s easy to forget that we were completely shut down for most of last year. Factories were not making near the same amount of kitchen appliances, furniture, etc. China, in particular, is having energy issues that are seriously affecting the production of your favorite goods. But now Americans are ready to use their pandemic savings for big upgrades. They want a new car, to redecorate their home, or to splurge on holiday gifts. The shortage of goods is pushing up against high demand. And if prices are high because of high demand and low inventory, then prices will get better when inventory grows and demand is more steady.

So then, why are Americans so sour on the economy?

Are average Americans really tracking the changes in the CPI? Probably not.

Have people stopped spending because of their inflation fear? October’s retail sales say, hell no.

So then what is it? Why is inflation fear so widespread?

Well, the media has a lot to do with it.

The media has been hammering inflation, supply chain, and other economic issues without providing the context.

In the current media ecosystem, where engagement and clicks are the most important, news outlets would rather share frightening headlines than provide the context that Americans need to understand where the country is going.

Is Inflation Biden’s Fault?

And the country is heading in the right direction.

But the media would have you believe that President Biden can wave his magic economic wand and solve inflation and supply chain issues, but he’s choosing not to.

Right or wrong, every president gets blamed for bad economic factors.

Gas prices are a great example. Car-mobile Americans see gas prices every day as they drive to work. If gas prices are up, most Americans are going to know and not be happy about it. But gas prices have nothing to do with who’s president. A group of autocratic countries mostly control gas prices (another great reason to convert to sustainable energy). President Biden doesn’t have much leverage over Putin or MBS unfortunately.

While the media is focused on the wrong economic levers, Biden is trying to pull the levers he can as President. One of those levers is reducing the congestion at shipping ports. Since Biden’s announcement, the Port of Los Angeles saw a 25% drop in loitering shipping containers.

Another way to reduce inflation is actually to pass the Build Back Better agenda. Part of the BBB bill (how many B’s is enough?) is to make the cost of healthcare, prescription drugs, and child care more affordable. Reduced costs in health and childcare would go much further for American families than cutting the price of milk by $1.

So, yeah, gas prices and milk prices are high, but that doesn’t mean that President Biden isn’t steering a very successful recovery from an unprecedented pandemic-related recession.

Let’s give the guy a little break. He has a lot to solve.