The economy is doing well but voters are still upset

WORD: Prices for U.S. consumers jumped 6.2% in October compared with a year earlier as surging costs for food, gas and housing left Americans grappling with the highest inflation rate since 1990, but Americans have stockpiled $2.3 trillion more in savings over the past 19 months than they would have accumulated in the absence of the pandemic, based on prepandemic savings rate. What’s up with that?

In the quarter to August, used cars, hotel rooms, and airfares made up less than 5% of America’s consumer-price index but accounted for the majority of overall inflation. Still, inflation is eroding the substantial gains in wages and salaries that have flowed to America’s workers in recent months, creating political headaches for the Biden administration and congressional Democrats and intensifying pressure on the Federal Reserve as it considers how fast to withdraw its efforts to boost the economy.

Americans have stockpiled $2.3 trillion more in savings over the past 19 months than they would have accumulated in the absence of the pandemic, based on prepandemic savings rates. Although the unemployment rate spiked into the double digits for a couple of months early in the pandemic, the unemployment rate now sits at a historically modest 4.6 percent, and it continues to fall.

According to the University of Michigan’s consumer sentiment survey, Americans rated current economic conditions about as low as they did early in the 2010s when Americans’ finance and unemployment numbers were demonstrably much worse than they are now (unemployment hit 10.6 percent in January 2010).

Some economists point to the psychological effects of higher inflation, which can have a profound impact on people’s perceptions of the economy even though wage gains have largely kept pace with or even exceeded inflation in recent years.

When tabloid media continually tell people that everything is awful much more frequently than they were 15 years ago before everyone had a smartphone, the media loves to create controversy when there is none. Of course, assigning blame is their calling card now.

President Biden pledged Wednesday to address rising prices as newly released numbers showed Americans’ paychecks aren’t going as far as before. Still, there is little he can do corporations raise prices to make shareholders happy.

If the Fed raises rates, it could put us into a recession, but some economists believe that inflation will coll down as the supply of goods starts to loosen up. However, the bottom line is that we have more money, but we’re paying more for the things want. You can bet Republicans will pounce on that.

Originally published at https://commonsenseandpolitics.com on November 10, 2021.

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