Why data on the economy doesn’t match our feelings
Why data on the economy doesn’t match our feelings
Leading up to the election, economic figures said the economy was doing pretty well and inflation was slowing down significantly. Yet a lot of people just didn’t feel it.
Now, inflation expectations are rising, polls show economists say there’s a higher risk of recession due to chaotic tariff policy, and consumers have become even more pessimistic, according to survey data.
Gene Ludwig is chair of the Ludwig Institute for Shared Economic Prosperity and former U.S. Comptroller of the Currency. He’s also author of “The Vanishing American Dream: A Frank Look at the Economic Realities Facing Low- and Middle-Income Americans.” He joined “Marketplace Morning Report” host David Brancaccio to discuss what’s behind the disconnect between the economic data and how people actually experience the economy. The following is an edited transcript of their conversation.
David Brancaccio: People’s lived experience tell us that the economy needs work. Yet — I mean, I end up reporting a lot of these — the headline economic numbers have been saying things are actually a-OK, maybe we should stop whining. How do you resolve this great divide over numbers versus what we see with our eyes?
Eugene Ludwig: We started looking at this back about, oh, five, six years ago when we held a symposium to question why things felt bad for middle- and low-income Americans. But at the time, the headline statistics were looking pretty good, so I decided with the Institute to begin to study the numbers and try to figure out why the folks at that symposium, and in my own experience growing up in a small town in Pennsylvania and seeing it deteriorate, why is this [there] disconnect between what these headline numbers tell us every day and what we’re experiencing?
Brancaccio: Some of it is we do the monthly unemployment rate. It is a crucial piece of data, but the headline one does not account for people who are so discouraged by the job market that they’ve quit looking; sometimes the payroll count that the Labor Department does [does]. Yeah, look at all these people who got jobs this month, but maybe they were working multiple jobs.
Ludwig: Well, all that is absolutely true, but sadly it’s even worse than that. What it doesn’t account for is people who have a piece of a job — they work an hour or two here and there, but they want a full-time job. It doesn’t account for that. If they worked one hour in the last two weeks, they’re counted as being employed. That doesn’t in any way suggest whether the person can earn even above a poverty wage. So unemployment — as we’d like to say it: “functional unemployment” — it’s really in the 20s, which is horrifying. And for people of color, it’s much worse.
Brancaccio: Many orders of magnitude higher than the headline figure that they hand me every month when the unemployment rate comes up.
Ludwig: That’s only one of the headline statistics that’s misleading. The inflation rate is also misleading. CPI is what it’s called, the consumer price index, [it] is a basket of 80,000 goods and services. But for middle- and low-income Americans, they use a relatively narrow group that matter to them most, which is food, housing, education, transportation to work. And if you look at the basic things that they can afford to buy, they have inflated over the last 20 years more rapidly than the CPI. So they’re worse off. And that is a big deal because it means that the net-net, their wages haven’t increased over the last 20 years. For 60% of America, they’ve actually declined or been stagnant.
Brancaccio: I mean, I remember we used to spend a lot of time, when I was a kid, focused on the Misery Index to gauge people’s well-being. But see, that was built on the faulty unemployment number that you were talking about. It was, I think, unemployment rate + inflation = misery. But we need something better, I guess.
Ludwig: We do indeed, and we’ll be coming out with, over the next couple of months, a Shared Economic Prosperity Index and a Minimum Quality of Life measure that, together, will give the country a sense of how people in the middle class are doing in reality.
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