The Economy isn't Good. It's Great.
Don’t believe the complainers or conservatives. The US economy is on a tear.
January 2024
It’s become mainstream saying the economy is subpar. Folks complain about inflation, conservatives routinely say the economy is in poor shape, & most folks who don’t know how to feel go along with the notion. Last week on a Tiktok live debate, my opponent flatly told me “the economy is in the shitter.” This, despite the fact that he was earning more than he ever had.
What I imagine when I hear folks saying this economy sucks.
As an economics major but more importantly as someone who lived through the horror of the Great Recession, I’m continually flabbergasted by folks’ willingness to dismiss the US economy’s current performance. Because contrary to what the pundits say, the US Economy is far from meager. It’s strong, really strong. Let’s look at the data, with the first stop at the quintessential economic indicator of strength: unemployment.
US unemployment: 3.7%
Black unemployment: 5.8% (historic low)
Latinx unemployment: 4.6% (historic low)
These numbers mean that people have jobs and that those who want to work can usually find it. A weak economy doesn’t have such luxuries (see South Africa with a 33% unemployment rate). In the Great Recession US unemployment hovered near 10% - nearly three times the rate it is today - with millions of folks out of work and no where to turn for a new job. I remember seeing videos of lines wrapping around the block for food banks at the time. Back then, holding onto your job was enough to be grateful for.
And yet today despite so many folks working the economy is still dumped on. Many say that even though they are working, it’s not enough. They can’t afford a home, or perhaps costs of goods have increased because of inflation (we’ll directly address this point later). This is valid. Just because folks have jobs doesn’t mean that they’re earning enough to achieve the quintessential American dream. That’s in part because of corporations’ unwillingness to share their earnings with the workforce, instead allowing profit to consolidate at the executive level or go towards stock buybacks (both making the rich, richer). See the graph below:
You can see that there’s been a marked decline in the share of income going to labor since 2000. If you zoom out and look at the implications of this wealth distribution, you’ll find that the median income for a family of four in America is $74,580 in 2022. Decent, but could be significantly better.
But I digress. A good economy doesn’t mean that it’s equitable. It means that it’s good. That folks have jobs. That economic suffering is relatively minimized. And look - not making enough money is still better than not making any money. And when the economy is actually in the shitter and millions of folks are unemployed - say, during the Great Recession or onset of COVID - that’s when people remember what a “bad economy” truly feels like.
But it’s not just unemployment that indicates strength. Housing prices are high too, as is the stock market:
Source: Zillow
Source: Google “SPY” - valuation of the S&P500
This is also unequivocally positive. Folks (i) have jobs and (ii) their assets are appreciating. Higher net worths mean folks are more willing to spend, and since the American economy is primarily consumer-driven, this is good for us. You know what folks would be saying if the stock market tanked and housing prices collapsed? That the economy is in bad shape.
We have the opposite.
What about foreclosures? When I was a freshman in high school I saw multiple neighbors lose their homes because of predatory skyrocketing variable-rate mortgages they’d agreed to years prior. Photos of folks carrying their personal belongings out of their homes with tears in their eyes are seared into my (and many other Millennial’s) memory. The Great Recession was a twin economic and real estate market crash, after all. Today’s economy tells a different story. Foreclosure rates are near record lows:
This is great news because it means that folks are keeping up with their mortgage payments. More foreclosures would mean an inability to pay debt, and we simply don’t have that right now.
So (i) people have jobs (ii) their assets are appreciating, and (iii) folks aren’t falling short on mortgage payments. All good news. So where is the economic pessimism coming from? A few points worth discussing.
Inflation
Inflation has been a recent problem. After the US government injected an unprecedented amount of cash into our economy to stimulate it during and after the pandemic inflation rates hit nearly 10% for 6 of the 12 months in 2022:
Inflation rates by month, USA 2000 - 2023
Inflation can create economic pain as folks can no longer afford the same amount of goods with the same dollar they had last year. Their money is less powerful. That’s not great.
On the flip side, inflation can be controlled. As long as wages and GDP growth keep pace and we have an active Federal Reserve tightening monetary markets & raising interest rates, it’s manageable. Also - and this is a semi-hot take - inflation may be a sign of an economy that’s too good. Inflation occurs because of money rapidly flowing through an economic system. High demand for goods and services push prices up, wages rise in response, people keep buying, and the cycle continues. If the economy were bad and folks didn’t have money to spend, we wouldn’t have an inflationary problem to worry about. In the table above, you can see that exact pattern during the Great Recession years (especially 2009 and 2010 when unemployment was at its peak): inflation was negative or near 1%.
Low income > low spending > deflation.
High income > more spending > inflation.
Inflation is a problem, but not a bad economy problem.
Credit Card Debt
Credit Card debt, USA
Credit card debt is at an all-time high. That’s a cause for concern. High debt means folks aren’t actually saving the money reflected in their asset valuations increasing or wages from their job. If things turn sideways and folks lose their jobs, the credit card debt could crush their ability to pay their mortgages and other bills. And if they don’t pay it off quickly, the interest alone could balloon and bankrupt them for life.
The level of credit card debt is a point of concern in the contemporary economy. But it doesn’t reflect a “bad economy” on its own.
A Good Economy Doesn’t mean Success for Everyone
The point of this article isn’t to say that a good economy means everyone is happy. A good economy doesn’t mean an equitable one. Unfortunately there are millions of folks struggling to afford basic necessities. Many struggling to save for the first down payment on their home, or rent payment, or student loans. The median household income for a family of four remains around $70,000. For such a family to afford the median home price of $350k would take years of prudent saving just to get the 20% down payment. 12.4% of Americans live at or below the poverty level.
Inflation disproportionately hurts these folks, who make little and need to stretch their dollar across their housing, food, necessities, and lifestyle spending. When politicians talk about folks hurting in this economy this is who they’re talking about. And that’s fair. Though we generate more wealth as a species per year than we ever have in history, it’ll be a long time before we hit the apex where poverty is eradicated. An ideal world is one in which a good economy is an equitable one.
Things Change Quick
Nothing mentioned in this article is meant to be permanent commentary. The economy can change overnight and from forces no one can predict. Maybe technology companies nosedive or the housing market crashes again. Russia decides to be an idiot and invade France, tanking global trade. Perhaps the mounting level of credit card debt gets called in and a record number of Americans declare bankruptcy.
The number of reasons for the next economic correction are countless and I’m sure in the aftermath we’ll all look back and declare how obvious it was that the good times couldn’t last forever. But for now, the US economy continues to power forward. So when you hear folks say that the economy is “bad,” correct them with the data you’ve learned from this piece.
Because the state of the economy isn’t a political question, it’s a factual one.
And the economy is great.
—
Win an Apple Watch!
Thanks for reading! As you know 2024 promises to be a huge year with the Presidential election coming up. If you want to support the Democrats as we fight authoritarianism, stand by facts, and enact progressive policy, consider donating to help the Democrats flip George Santos’ former Congressional seat. The special election will be held in a month and every dollar donated helps knock on more doors and get the message out about the democratic candidate, Tom Suozzi. You can donate to a SUPER PAC supporting his candidacy here and as a special bonus, you’ll be entered into a raffle for a new Apple Watch! This giveaway is not affiliated with Substack.