Bill Sims
Contributing columnist
The economy is a paradox. For many Americans, it’s a puzzle wrapped in an enigma, and blurred by contradictions. So what follows is a humble attempt to unravel the puzzle, or maybe not. I’ll let my readers be the judge of that.
The Guardian media group recently did a poll of Americans’ perception of the economy. PBS summarized the poll findings this way.
· 55% believe that the economy is shrinking and 56% think that the U.S. is experiencing a recession. However, the U.S. is not in a recession and the broadest measure of the U.S. economy, gross domestic product (GDP), has been steadily growing.
· 49% believe that the S&P 500 stock market index is down for the year though the index went up about 24% in 2023 and is up so far this year more than 12%.
· 49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.
So the obvious question is, how can so many people have such misunderstood impressions about the state of our economy. One way to answer that question is with another question. Where are all these people getting their information? If many of these folks are getting their information from cable news channels or blogs that report opinions instead of data-based facts then you can begin to understand the discrepancies. But perhaps there’s more to the explanation for people’s confused impressions about the state of our economy.
Nothing affects a majority of people’s opinions about the economy than “pocketbook” issues. Prices have remained high and that’s a fact. Nothing makes an impression like grocery store prices. In 2023, Kroger’s profits were up 36% and Publix profits were up 49%, and by some benchmarks those profits could rightfully fall into the greedy zone. They can’t blame their circumstances on costs, not with those kinds of profits. But we all know that Kroger isn’t alone in this greedy gambit. My jaw dropped the other day for what it cost for a small bag of screws at Lowes. If you’re trying to build, the cost of lumber, sheet metal, shingles, dry wall, nails and concrete are off the charts.
It made sense that prices would go up during and after Covid because of the supply-chain snarls. High demand and limited supplies and yes, prices go up, but there are no supply chain issues anymore, just retailers who are keeping prices up in the stratosphere until consumers decide to fight back by just saying “no,” not buying those non-essentials until prices come down.
The economy and the stock markets are doing well because big companies’ profits are so high, but here’s the bigger picture that leads to confusion. Compared to the European Union (aka the Eurozone), U.S. inflation is about the same, slightly higher. The U.S. inflation rate is 3.4%, G-20 nations 3.5%, Turkey’s inflation 68.5%, Russia’s inflation 7.8%, China’s inflation: 1%, Mexico’s inflation 4.65%, India’s inflation 4.85%. Argentina’s inflation 288% (that’s not a misprint). The U.S. looks good on this account.
Unemployment rates are another indicator of comparative economic circumstances around the world. According to the International Monetary Fund, 2024 unemployment rates, selectively around the world, go something like this: United States 3.7%, Great Britain 3.9%, Turkey 9.1%, Spain 11.6%, Canada 5.7%, Euro Area 6.4%, France 7.5%, Germany 3.1%, China, 5.2%, Russia: 2.8% (war time economy), India: 8.1%. The U.S. looks good on this account as well.
Reflecting on all of this, the Wall Street Journal’s chief economic columnist put things this way. “Economic performance can seldom be tied to any leader’s specific decision, and the shocks of recent years hit almost everyone.” It can emphatically be said that globalization has had an impact on inflation worldwide.
According to the Bureau of Labor Statistics, the “Inflation-adjusted wages and salaries increased 0.8% for the 12-month period ending in March of 2024.” Put that against the inflation rate of 3.4% over the past 12 months ending in April and in spite of the U.S. economy doing very well, the worker is lagging behind.
Which brings me back to the wealth gap. In this era of globalization, the wealth gap is a global phenomenon, not just a U.S. issue. No surprise since corporations have gone global and tax policies are lagging behind.
Is there hope amidst this confusion? Steve Rick, chief economist for TruStage Financial Group says, “While concern over the economy is widespread, there are bright spots. Leading the way is the jobs market. Unemployment is very low and the middle market feels this resilience, with 65% (in their polling) reporting little or no concern over job security. Moreover, 75% say their financial situation is improving or staying the same.” Yet confusion and misinformation prevail.
The Guardian media poll mentioned at the beginning of this article, bulleted graphically by PBS’s NewsHour, shows that at least half of Americans are confused or misled about their sense of a contracting economy, a spiraling stock market, and the U.S. unemployment rate. But while these misperceptions may be driven by misinformation, the pocketbook effect tells consumers that something is amiss, and that something stands out, like prices. While inflation may be shrinking down to normal levels, wages are still having a hard time keeping up.
One of the founders of modern television journalism, Edward R. Murrow, once said something that seems to summarize the current situation: “Anyone who isn’t confused really doesn’t understand the situation.”
Bill Sims is a Hillsboro resident, retired president of the Denver Council on Foreign Relations, an author and runs a small farm in Berrysville with his wife. He is a former educator, executive and foundation president.
