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Ben Casselman had a useful piece in the New York Times examining the extent to which wages have outpaced prices since the pandemic. While he notes that for most people they almost certain have, there are people for whom this is likely not the case.
In fact, this will always be the case, even in the best economy, which arguably is what we are seeing now — or at least best in half a century. But there are some additional points to the ones Casselman raised that are worth keeping in mind.
First, Casselman notes that not everyone consumes the same basket of items. For lower income people, food is a larger share of their budget and food prices have risen more than the overall rate of inflation since the pandemic.
This is true, but it is important to keep in mind that the lowest paid workers have seen the largest wage gains since the pandemic. To take an example, non-supervisory workers in hotels and restaurants had a 32.0 percent increase in their average hourly pay from before the pandemic. Their pay averaged $14.92 an hour in February of 2020. It had risen to $19.69 an hour in September of this year.
That easily outpaced the 25.8 percent increase in food prices. No one would try to claim that someone earning $19.69 an hour today is doing well, but they are doing better than the person earning $14.92 an hour at the start of 2020. It would be hard not to score this person as being better off.
Casselman notes that the widely derided increase in house prices has not been bad news for everyone. Specifically, the two-thirds of households that own their home might actually be feeling pretty good that the value of their house has risen.
However, there is another aspect to this picture that is also worth noting. More than 14 million homeowners refinanced their mortgages, taking advantage of the low mortgage rates we saw from the start of the pandemic until the Fed began raising rates in March of 2022.
Those that didn’t borrow additional money with a cashout refinance are saving an average of $2,500 a year in interest payments. That would be a big deal for a family with an income around $80,000. For some reason these savings for a large number of middle-class families rarely get mentioned in discussions of people’s well-being.
Working from home exploded during the pandemic. While it has fallen somewhat since the peak months of the shutdown period, the number of people working remotely is nearly 20 million more than the pre-pandemic number. This increase is nearly one-eighth of the workforce.
These people are saving thousands of dollars a year in commuting costs and other expenses associated with working in an office. They also are saving hundreds of hours a year in commuting time. Any assessment of whether they are better off would need to factor in the impact of the increased opportunity to work from home.
One way to find out how people feel about the economy is to ask them. Another way is to see what they do.
The answers to the first question can be somewhat ambiguous (almost everyone seems to feel they are doing much better than the rest of the country). The answer to the second question is less ambiguous.
We see people buying more of just about everything. We have seen record levels of air travel in the last year. We also saw record levels of road travel on the summer holiday weekends.
We know numbers can be skewed by the buying patterns of a small number of rich people, but that story is hard to tell here. Wealthier people do fly disproportionately, but with peak summer travel nearing 3 million flights a day, we are looking far beyond the one percent. That story is even more clear with road travel, with more than 60 million people hitting the road on holiday weekends this summer.
We can also look to other areas of non-necessary spending that have seen big increases since the pandemic. Purchases of televisions was 79 percent higher in the third quarter of this year than in the last quarter before the pandemic. (This is quality adjusted, so it does not mean 79 percent more TVs.)
Inflation-adjusted purchases of restaurant meals was 10.5 percent higher last quarter than before the pandemic. Purchases at fast-food restaurants was 10.1 percent higher last quarter than before the pandemic. It’s hard to believe that the rich are driving spending at McDonalds and Subway.
In short, if we look at what people are spending, they do seem to be considerably better off than before the pandemic. Again, this is not true for everyone. Some people have lost jobs and are now forced to work for lower pay. Some people have become disabled and may be able to work less (often because of the pandemic), or not at all. But if we are trying to look at the big picture, consumption patterns seem to be telling us that people feel they are better off today than they were before the pandemic.
Ben Casselman had a useful piece in the New York Times examining the extent to which wages have outpaced prices since the pandemic. While he notes that for most people they almost certain have, there are people for whom this is likely not the case.
In fact, this will always be the case, even in the best economy, which arguably is what we are seeing now — or at least best in half a century. But there are some additional points to the ones Casselman raised that are worth keeping in mind.
First, Casselman notes that not everyone consumes the same basket of items. For lower income people, food is a larger share of their budget and food prices have risen more than the overall rate of inflation since the pandemic.
This is true, but it is important to keep in mind that the lowest paid workers have seen the largest wage gains since the pandemic. To take an example, non-supervisory workers in hotels and restaurants had a 32.0 percent increase in their average hourly pay from before the pandemic. Their pay averaged $14.92 an hour in February of 2020. It had risen to $19.69 an hour in September of this year.
That easily outpaced the 25.8 percent increase in food prices. No one would try to claim that someone earning $19.69 an hour today is doing well, but they are doing better than the person earning $14.92 an hour at the start of 2020. It would be hard not to score this person as being better off.
Casselman notes that the widely derided increase in house prices has not been bad news for everyone. Specifically, the two-thirds of households that own their home might actually be feeling pretty good that the value of their house has risen.
However, there is another aspect to this picture that is also worth noting. More than 14 million homeowners refinanced their mortgages, taking advantage of the low mortgage rates we saw from the start of the pandemic until the Fed began raising rates in March of 2022.
Those that didn’t borrow additional money with a cashout refinance are saving an average of $2,500 a year in interest payments. That would be a big deal for a family with an income around $80,000. For some reason these savings for a large number of middle-class families rarely get mentioned in discussions of people’s well-being.
Working from home exploded during the pandemic. While it has fallen somewhat since the peak months of the shutdown period, the number of people working remotely is nearly 20 million more than the pre-pandemic number. This increase is nearly one-eighth of the workforce.
These people are saving thousands of dollars a year in commuting costs and other expenses associated with working in an office. They also are saving hundreds of hours a year in commuting time. Any assessment of whether they are better off would need to factor in the impact of the increased opportunity to work from home.
One way to find out how people feel about the economy is to ask them. Another way is to see what they do.
The answers to the first question can be somewhat ambiguous (almost everyone seems to feel they are doing much better than the rest of the country). The answer to the second question is less ambiguous.
We see people buying more of just about everything. We have seen record levels of air travel in the last year. We also saw record levels of road travel on the summer holiday weekends.
We know numbers can be skewed by the buying patterns of a small number of rich people, but that story is hard to tell here. Wealthier people do fly disproportionately, but with peak summer travel nearing 3 million flights a day, we are looking far beyond the one percent. That story is even more clear with road travel, with more than 60 million people hitting the road on holiday weekends this summer.
We can also look to other areas of non-necessary spending that have seen big increases since the pandemic. Purchases of televisions was 79 percent higher in the third quarter of this year than in the last quarter before the pandemic. (This is quality adjusted, so it does not mean 79 percent more TVs.)
Inflation-adjusted purchases of restaurant meals was 10.5 percent higher last quarter than before the pandemic. Purchases at fast-food restaurants was 10.1 percent higher last quarter than before the pandemic. It’s hard to believe that the rich are driving spending at McDonalds and Subway.
In short, if we look at what people are spending, they do seem to be considerably better off than before the pandemic. Again, this is not true for everyone. Some people have lost jobs and are now forced to work for lower pay. Some people have become disabled and may be able to work less (often because of the pandemic), or not at all. But if we are trying to look at the big picture, consumption patterns seem to be telling us that people feel they are better off today than they were before the pandemic.
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Donald Trump seems to have forgotten what the economy was like when he left office. He talks as though it was booming and then Biden sank it. In fact, the opposite is the case.
The economy took a massive hit in the spring of 2020 from pandemic shutdowns, while it did regain many of the lost jobs in the summer, momentum slowed sharply in the fall.
In the last three months of the Trump administration we were creating jobs at a rate of just 140,000 a month. We were still down 9.4 million jobs from the pre-pandemic level. At the Trump rate of job creation it would have taken us more than 5 ½ years to get back the jobs we lost in the pandemic.
The Biden recovery package hugely hastened the pace of job growth. In the first two years of the Biden administration we created jobs at a 555,000 monthly pace. We got back the jobs lost in the pandemic in less than a year and a half. This was far faster than almost anyone expected.
Trump also seems confused about the state of the economy before the pandemic. While the economy was healthy, there was nothing resembling a boom. Essentially it was just continuing the recovery that Obama had set in place after the Great Recession.
The monthly rate of job growth in the Trump administration, pre-pandemic, was actually somewhat lower than it had been in the last three years of the Obama administration. We created an average of 180,000 jobs a month under Trump before the pandemic. That compares to an average of 225,000 jobs a month in the last three years of the Obama administration.
That may look like a boom in Donald Trump’s head, but not in the real world. For completeness we can include in the chart the 349,000 monthly pace of job growth in the Biden administration through September of this year.
Donald Trump seems to have forgotten what the economy was like when he left office. He talks as though it was booming and then Biden sank it. In fact, the opposite is the case.
The economy took a massive hit in the spring of 2020 from pandemic shutdowns, while it did regain many of the lost jobs in the summer, momentum slowed sharply in the fall.
In the last three months of the Trump administration we were creating jobs at a rate of just 140,000 a month. We were still down 9.4 million jobs from the pre-pandemic level. At the Trump rate of job creation it would have taken us more than 5 ½ years to get back the jobs we lost in the pandemic.
The Biden recovery package hugely hastened the pace of job growth. In the first two years of the Biden administration we created jobs at a 555,000 monthly pace. We got back the jobs lost in the pandemic in less than a year and a half. This was far faster than almost anyone expected.
Trump also seems confused about the state of the economy before the pandemic. While the economy was healthy, there was nothing resembling a boom. Essentially it was just continuing the recovery that Obama had set in place after the Great Recession.
The monthly rate of job growth in the Trump administration, pre-pandemic, was actually somewhat lower than it had been in the last three years of the Obama administration. We created an average of 180,000 jobs a month under Trump before the pandemic. That compares to an average of 225,000 jobs a month in the last three years of the Obama administration.
That may look like a boom in Donald Trump’s head, but not in the real world. For completeness we can include in the chart the 349,000 monthly pace of job growth in the Biden administration through September of this year.
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