Ramesh Ponnuru says that discontent over the economy can probably be explained fairly simply. It's all about declining income:
Average wages are down in real terms — adjusted, that is, for inflation — since President Biden took office. They are roughly 3 percent lower than their peak in April 2020....Even when you compare wages today with the pre-pandemic trend, they are still about 2 percent lower than people had reason to expect.
Ponnuru doubles down on this today, but he's mistaken for a couple of reasons. The first has to do with his trend argument: Ponnuru's chart showing the trendline of wages is cherry picked to start during the period 2017-19, the strongest years for wage growth in recent memory. Instead let's take a longer-term look:
If you take a longer look, hourly wages are right on the trendline of the past decade.
The second mistake is that Ponnuru's "peak" in April 2020 is artificial, a result of lots of low-wage earners losing their jobs during the early months of the pandemic. This is technically known as a "composition" problem and it's well understood. But take a look at this chart:
Hourly earnings (brown line) show the April 2020 spike, but ECI (green line), which adjusts for composition differences, doesn't. If you use ECI, which was more accurate in the early days of the pandemic, real wages have been virtually flat since their peak and are up compared to 2019.
There's at least a kernel of truth in Ponnuru's argument: Wage growth hasn't been great since the start of the pandemic. And there are lots of legitimate ways to measure wages and inflation. That said, real wages are up by nearly every measure over both the past four years and over the past year:
Cherry picking the dates is really the only way to get any other result. As always, the real explanation for economic discontent is that Americans aren't unhappy about the economy. Only Republicans are.
UPDATE: Ponnuru's chart uses PCE as an inflation measure, not CPI as I thought. My mistake. I've corrected the text.
Overall, yes--but it does depend on the sector and the individual. As you pointed out earlier, the mortgage generation market has dropped off a lot--so not a good time to be a mortgage broker. And a lot of larger firms have downsized recently.
....and don't forget the wealth effect. People get upset if the housing market goes down, and those with 401K's do keep an eye on the stock market...
But the market and housing prices have gone up since the start of the pandemic. Obviously you can cherry pick a peak as your start date to pretend that wealth is down, but cherry picking to make a chart show the preferred narrative isnt going to shift the national mood (at least not without a committee marketing campaign )
Wages, jobs, wealth....everything is getting better and the improvements are broadly shared across different demographic and income groups.
No matter how good the economy is (and its very good right now) you can always find some people who are struggling. We shouldnt dismiss those people, but we also shouldnt pretend that these struggles define the recent economy. The media might be caught in this misleading spin cycle, but we dont have to follow suit. You say 'alot of firms are downsizing', but given the jobs and wage figures, that doesnt appear to be true. Some firms are downsizing, but thats always true no matter the state of the economy.
Cherry picking? Someone might cherry pick a start date? Inconceivable!
You keep using that word. I do not think it means what you think it means.
😉
Dear Kevin:
I know how much I made at my first minimum wage job.
I know how much I made 20 years ago with my 6 figure bonuses.
I know how much I got paid 5 years ago.
I know what I am getting paid now.
I know I haven't kept up with inflation from about 2004 to 2022.
But it is ABSURD to have to keep adjusting everything for inflation.
Do you know how different inflation is when you are 25 compared to 50 and have kids in college or when you are 65 and nearing retirement?
If you don't then you can't properly adjust for inflation.
I moved from NYC to lower cost areas. Doesn't that count too? Then I moved to suburban DC. How can I adjust all of my salaries for the local cost of living?
Wages have been stagnant since the 70's and no one cares. At all.
Of course oped writers, not just rightist hacks like Ponnuru, can find something or other that is actually not great (although Kevin is right that real wages have not significantly declined). But the thing about the current attitude towards the economy is that it is totally out of whack with previous responses. The rating in many polls is as about bad as it was in 2008, when there was a real threat of another Depression. This is absurd, and not explained by any real economic data. What is different from the past is the massive polarization in all types of poll response.
https://fred.stlouisfed.org/series/UMCSENT