Screenshot of AP website report
China Daily, 21st (Dang Chaofeng) The Associated Press website published an article on the 19th saying that official US data showed that inflation has eased, why Americans are still pessimistic about the economy.
The article stated that data released by the U.S. Department of Labor on the 14th showed that the U.S. Consumer Price Index (CPI) remained unchanged month-on-month in October this year. This is the latest sign that inflation is gradually cooling from last year’s highs. A report released by the U.S. Department of Commerce on the 15th showed that although Americans’ retail spending slowed down in October from the previous month, their consumption was still enough to drive economic growth.
Even so, about three-quarters of respondents thought the economy was in bad shape, according to an Associated Press-NORC Center for Public Affairs Research poll last month. Two-thirds of respondents said their spending had increased. Only a quarter said their income had increased.
The article stated that inflation has eased, but why do Americans still feel pessimistic about the economy? There are many reasons for this disconnect, but economists are increasingly pointing to one factor in particular: the lingering financial and psychological effects of the worst bout of inflation in 40 years. Although inflation has cooled steadily over the past year, prices for many goods and services remain much higher than they were three years ago. Inflation is slowing, but most prices are high and rising.
Federal Reserve member Lisa Cook captured this dynamic during a recent speech at Duke University. Cook said most Americans want these prices to return to pre-pandemic levels. My family said the same thing.
This is especially true for some of the goods and services Americans spend most money on: bread, beef and other groceries, apartment rent and utility bills. Every week or every month, consumers are reminded how much these prices have increased.
For Katherine Charles, a 40-year-old single mother in Tampa, Florida, slowing inflation hasn’t made it easier to make ends meet. The rent increased by 15% in May. This summer, despite the sweltering heat in Tampa, Charles kept the air conditioner turned off during the day to reduce his electric bill. Additionally, she felt the need to spend less on groceries. “My son loves red meat and we can no longer afford red meat like we used to. The economy is not getting better for anyone, especially me,” Charles said.
The article stated that many people are still dissatisfied with the economy, among other factors. Political partisanship is one of them. Republicans are far more likely than Democrats to describe the economy as sluggish, according to the University of Michigan’s monthly consumer sentiment survey.
Karen Dinan, a Harvard University economist who served in the administrations of former President George W. Bush and Obama, said: “Partisan divisions are sharper than they used to be, in part because the country is more polarized.”
Many Americans, like Charles, are still feeling the pain of inflation. In October, the national average price per gallon of milk reached $3.93, a 23% increase since February 2020, before the outbreak. A pound of ground beef sells for $5.35, a 33% increase since then. Although the average price of gasoline is down significantly from a year ago, it is still up 53%, averaging $3.78 per gallon.
Edelberg, a senior fellow at the Brookings Institution, said jumps in prices for the items people buy most often help explain why many people are unhappy with the economy.
However, broad national data do not reflect the experience of ordinary Americans, many of whom have not seen their wages keep pace with rising prices.
“Realistically, most people are probably very close to pre-pandemic levels,” said Brad Hershbein, senior economist at the Upjohn Institute. “But there are a lot of exceptions.”
For example, low-income Americans have generally seen the largest wage increases since the pandemic. Fierce competition for frontline workers at restaurants, hotels, retailers and entertainment venues has forced companies to hike wages significantly.
But economic research shows that poorer people generally face higher inflation rates because they spend a greater proportion of their income on volatile expenses such as food, gas and rent, which absorb some of the largest price increases.
“People at the lower end of the income distribution are getting higher raises,” said Anthony Murphy, senior economic policy adviser at the Federal Reserve Bank of Dallas. “But I don’t think that makes up for the fact that inflation is much higher. They’re consuming the same goods as Most people are different.”
A Census Bureau survey studied by Murphy and his colleague Aparna Jayashankar found that nearly half of Americans said they felt “very” stressed about inflation, little changed from a year ago, even though inflation has It has declined since last year.
“People are obsessed with the fact that bills for very important things — gas, food, grocery stores — those things still seem to be very high despite the rate they’re growing,” Hershbein said. Not as fast as it used to be.” “If everyone was out of work, we would be looking at this.”