The United States boasts one of the strongest economies in the world, with a 2.4% inflation rate and a 4.2% unemployment rate. Yet most Americans think the US economy is doing poorly, and they point to the high price of groceries. What is going on here? I have my own scenario, which I’m not hearing in the mainstream media.
Suppose you have been the head of a family since Covid days. Back then, you were forced to stay home from work or school, without travelling either for work or for leisure, without going out for restaurants or other recreation, or without having to hire outside childcare for your family. You spent less money, and you were able to make ends meet and maybe even pay off some of your previous debt. These were days of financial contentment and stability. Because this was happening to millions of people, they weren’t going out and spending money, and so prices remained low on account of the low demand. These were the good-ol’ Covid days that you may remember with nostalgia.
Along came the end of Covid, and millions of people exercised their pent-up demand on a spending spree: going out to restaurants or travelling. They returned to their erstwhile lifestyles of living beyond their means. This caused a lot of financial stress, perhaps fostering a keep-up-with-the-Joneses mindset. With all this spending, prices naturally went up, bringing inflation to 9% at one point. But then the Fed started combating inflation, and the rate fell all the way back to the current 2.4%.
However, people are still comparing current prices to prices during Covid, and the inflation rate, while low, is still positive, meaning that prices haven’t come down at all. People look back to the Covid days positively, since prices were low.
How about unemployment? Politifact claims that for the first 30 months of Trump’s presidency, the US created 5.2 million new jobs, compared to 13.2 for the Biden administration during his first 30 months. Consider the people who lost their jobs during the Trump administration, let’s say 5% of the workforce, just for the sake of argument. That means that the other 95% of employed workers kept their jobs and were scarcely affected by the economic downturn. Even today, they don’t care what the unemployment rate is (a historically low 4.2%), as long as they keep their own job.
On the other hand, inflation affects everyone, so 100% of the population cares about high prices. In summary, 95% of the population compare today’s high prices (NOT the inflation rate), with prices under Trump, and they don’t care at all about the unemployment rate. They are stressed out at living beyond their means, and look back wistfully to the days when they stayed peacefully at home with their families, saving money. They conclude that the economy under Trump was wonderful and under Biden it has been awful.
I want to emphasize that the same phenomenon has happened all over the world. The inflation rate and the unemployment rate have fluctuated the same way in almost every country. In Europe, for example, the EU inflation rate was 7.4% over 2022, compared to 7% in the US. The EU rate is estimated to have fallen to between 2.5% and 3% in 2024, on the same order as that in the US.
Therefore, to blame Biden-Harris for the inflation is misplaced. The economic trends have been the same in most countries, mostly because the psychological reactions to Covid have been the same. People in many countries are blaming their post-Covid stress on their national leaders, but in most cases, those leaders have not had much influence on the global trends.