How we see the economy depends on who “we” is,
How We See the Economy
Yahoo Finance tells us why a local deli employee believes the economy is swooping south.
Yes, she says that business is busier than ever. However, because people are depending on credit cards, most days, her boss has had to take cash from the bank after paying the staff. Customers don’t use cash because, as she explains, people are saving it for emergencies. Since her establishment, like others, has boosted prices, she assumes people cannot afford what they used to buy. As a result, she, like 59 percent of the people in a Bankrate survey, believe the downturn has begun.
At the same time, economists say that the U.S. economy is “remarkably resilient.” Citing all of the key metrics, we are moving toward Goldilocks. Through job creation, employers speedily revived a Covid economy–much faster than the Great Recession recovery. Under four percent for the past 13 months, unemployment is at historic lows. Also, they’ve avoided the traditional employment hit from reducing the inflation rate. Meanwhile, consumer spending continues to fuel economic growth. Up four percent, household consumption is alive and well.
Our Bottom Line: The Non-Economic Lens
Several years ago, we looked at a paper that documented the gap between the public and economists. More recently, economist Bryan Caplan explained that chasm with four biases that define a non-economic lens:
- An antimarket bias: The public sees more logic in a top down “command” solution rather than seeing the bottom-up power of supply and demand.
- An antiforeign bias: Somewhat invisible, the lower prices benefit of trade is less evident to the public than the job losses.
- A make-work bias: Again focusing on trade, the public worries that trade can bring unpredictable changes that might have a detrimental impact.
- A pessimistic bias: People tend to look back at a past that they remember as better than today.
Meanwhile, ignoring consumer sentiment and statistically anchored, the NBER and the Sahm Rule reflect the economist’s outlook.
My sources and more: This Yahoo Finance article returned me to the gap between economists and “the public.” It was the ideal complement to the Richmond Fed summary of the non-economic lens.
