Why We Hate Rising Prices More Than We Fear Losing Our Jobs
A tale of two economies
If you listen to Americans right now, you’ll be forgiven for thinking that when it comes to the economy, Joe Biden is the worst American president since Herbert Hoover. Every new poll seems worse than the last, and according to the polling-analysis site FiveThirtyEight, Biden has the lowest approval rating at this point in his presidency of any postwar president. Fewer than one in seven Americans think the country is on the right track, and most of those who think it’s on the wrong track seem to hold Biden responsible.
We all know the main reason for this, of course: inflation. Americans hate high prices, and high gas prices in particular, so with inflation at 9 percent and gas prices hovering around $4.50 a gallon even after a recent drop, it was inevitable that Biden’s popularity would take a big hit. But a recent poll from CNBC, its latest All-America Economic Survey, suggests that the president’s problems run deeper than that. The survey showed, naturally, that Americans were upset about inflation and Biden’s failure or inability to do anything about it. But it also included this perplexing result: People for whom jobs were the biggest concern said they favored Republican control of Congress by a 54–31 margin. And that was a bigger margin for the GOP than it enjoyed among those for whom the cost of living was the biggest concern.
That poll squares with a startling survey the Global Strategy Group released back in February, which found that 37 percent of respondents thought the U.S. economy had lost jobs in 2021, a year when a historic 6.6 million jobs were created; only 28 percent thought it had gained jobs. (The remainder either didn’t know or thought that the number of jobs had not changed.)
You can see Help Wanted signs everywhere. Although fewer people are in the workforce than before the pandemic, the unemployment rate is 3.6 percent—essentially what it was in 2019, which was the lowest it had been for decades—and the economy has added more than 9 million jobs since Biden took office, in part because of the $1.8 trillion stimulus package the Democrats passed in early 2021. Yet Biden and congressional Democrats are getting less than no credit for the buoyant job market.
Given how low unemployment is, and how high inflation is, you might normally think of this as a “best of times, worst of times” scenario. But Americans are saying it’s just the worst of times.
Some of this seems connected to what The Atlantic’s Derek Thompson recently called “the everything-is-weird economy.” But a couple of other things are going on that help explain how Americans are thinking about the job market. First is the argument that the 2021 stimulus was, weirdly enough, too successful—it helped the job market bounce back so strongly that it made itself seem superfluous. This is similar to what’s sometimes called the “paradox of preparation” in crisis planning: Measures taken to prevent or mitigate a crisis will end up seeming unnecessary if they’re successful.
You can see this today in comments suggesting that the employment recovery was inevitable, and purely a function of the pandemic’s ending. But it wasn’t. If you go back to 2020, most forecasts for the jobs recovery were grim; many economists anticipated the kind of slow, halting rebound 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 at 6 percent at the end of 2021. And J.P. Morgan Asset Management’s chief investment officer suggested that getting the rate down to 3.5 percent could take a decade.
In reality, the unemployment rate was about 4 percent at the end of 2021; it took only two years to get down to 3.6 percent. Although some of that decline was the result of Operation Warp Speed, which got us vaccines sooner than most had anticipated, the jobs recovery has owed much to the Federal Reserve’s easy-money policy and to the Democrats’ 2021 stimulus plan. Yet, in the process, all those grim predictions were strangely forgotten, so that today the public associates the stimulus plan almost entirely with high inflation rather than low unemployment.
On top of this, something very odd happened to Americans’ perceptions of the economy, beginning in 2020.
Historically, the unemployment rate has played a big part in shaping people’s view of how the economy is doing and, indeed, in shaping their very sense of well-being: When unemployment is low, people understandably feel much better about things than when unemployment is high. (The inflation rate has had a similar effect.) But a new paper by Darren Grant, an economist at Sam Houston State University, shows that since the pandemic started, this relationship has essentially vanished, and Americans’ views of the economy have become largely decoupled from the unemployment rate.
Why this happened in 2020 is easy enough to work out: Even when the unemployment rate soared, people felt more positively about the economy than they normally would have, because stimulus checks and extra unemployment benefits cushioned the impact of the downturn. But the interesting—and perplexing—thing is that this disconnect has continued as the job market has recovered. Even controlling for inflation, the steep reduction in the unemployment rate has not had much effect on people’s overall view of the economy.
The relationship between inflation and people’s perceptions of the economy has stayed pretty much the same over the past 50 years. The relationship between unemployment and people’s perceptions has completely changed. The Biden administration has talked about jobs every chance it gets, and the evidence of tight labor markets is all around. Yet few people seem to care.
Some of this is a spillover from people’s anger over inflation. Some of it is likely a product of the fact that COVID just won’t go away. And some of it, as others have argued, has to do with the media’s relentless focus on inflation (though the media being more interested in inflation than unemployment is nothing new).
Regardless, the essential point is that Americans are treating the job market as irrelevant next to inflation and gas prices. Who knows if that will stay true if the economy heads into a recession and unemployment starts to rise again? But what seems clear is that until inflation drops and stays down, Democrats can trumpet the low unemployment rate all they want. Americans just aren’t going to listen.