November 16, 2023
Can you imagine doing a 1300-word piece on how ordinary people are faring in the economy and never once mentioning unemployment? Apparently, the New York Times opinion page editors don’t think jobs matter to people, since they ran a column by Karen Petrou (the managing partner of Federal Financial Analytics) that didn’t mention unemployment once. The piece is titled “Why Voters Aren’t Buying Biden’s Boasts About Bidenomics” and uses a cornucopia of bad economics to argue the case against Biden.
It’s hard to know where to begin in addressing this piece, so it’s probably best to start where the piece starts.
“On Oct. 26, the Department of Commerce announced that gross domestic product had grown at an annual rate of 4.9 percent in the third quarter. This growth rate ran well above even optimistic forecasts, leading to what can only be called triumphalism from a White House dead-set on making “Bidenomics” a key to its 2024 presidential campaign. President Biden issued a self-congratulatory statement, the White House echoed it over and over — and Donald Trump’s relative popularity increased.”
Like every president, Biden has talked about economic growth. But he also talks about jobs and wages, sort of like all the time, as when he touted the big wage gains by UAW workers following their strike (which he supported). In fact, the very next week after the GDP report, Biden was very happy to boast about the 21st consecutive month of unemployment below 4.0 percent when the October jobs data were released.
Low unemployment is actually a very big deal for workers, not only because it means they have jobs, but it means that they can leave jobs they don’t like and find better ones. Workers have been doing this in large numbers since the unemployment rate fell to extraordinarily low levels in early 2022. As a result, according to the Conference Board, workplace satisfaction is at its highest level in the nearly forty years they have conducted the survey.
Biden also was happy to boast about wages that were outstripping inflation, a point that sort of squeaks through in the confusion in Petrou’s piece. The piece includes a graph of nominal wage growth and nominal price growth.
The graph shows wage growth modestly outstripping prices through most of Trump’s term, and then hugely outstripping prices in 2020. For Biden we get the opposite story, prices outpaced wages in 2021, then hugely outpaced wages in 2022, but inflation then dropped and wages are again outpacing inflation, with the biggest gains for those at the bottom (contrary to what Petrou told readers).
The pattern here is not much of a mystery to people who follow the economy. Wages hugely outstripped prices in 2020 because tens of millions of low-paid workers in restaurants, hotels and other service industries lost their jobs. When you get rid of low-paid workers, the average wage rises, just as the average height in a room increases if we get the short people to leave.
We saw the opposite story in 2021 as low-paid workers got their jobs back. We also did have the problem of serious supply disruptions created by the pandemic and Russia’s invasion of Ukraine. As the supply problems have eased inflation has come back down.
Inflation due to the pandemic was a worldwide phenomenon, not just something that hit the United States. In fact, we have dealt with the problem very well. The U.S. inflation rate is now the second lowest among major economies, only slightly higher than Japan’s.
It is fair to say that people don’t care that things are worse in Germany or Canada, they care about their own finances. But, Petrou is quite explicitly making an attack on Bidenomics as policy, not the fact that the economy has faced huge headwinds that would have caused serious problems regardless of what policies were pursued.
Ignoring the importance of the pandemic and the Russian invasion would be like complaining about the shortage of housing in an area just devastated by a hurricane and not noting the hurricane. It is understandable that the average person might recognize the damage done by a hurricane more readily than the economic damage caused by the pandemic, but it would be reasonable to expect that a person writing for the New York Times would be familiar with the impact of the pandemic.
Petrou highlights polls showing that most people think that the economy is doing badly and they are not buying Biden’s boasts. That is true, but a recent poll gives us important insights on this point.
The poll shows that roughly half the people think that the economy in their town or city is doing okay, but just 26 percent think the national economy is doing well. This huge gap between people’s assessment of their local economy and their assessment of the national economy cannot be explained by their personal experience. Rather this gap must be attributable to things that they are hearing about the economy from places like Fox News and the New York Times.