Economy feels bad without stimulus and pandemic relief – Business Insider

• Americans feel bad about the economy, even though the data shows a booming job market.
• That decoupling goes beyond inflation; it shows how Americans realized they could have a better deal.
• The recovery from the pandemic recession has shifted everyone’s expectations of what a good economy looks like.

The economy is doing really well. Don’t trust us – just look at the data.

If your immediate reaction was to shake your head, you’re not alone. Americans feel bad about the economy, and part of that is probably due to inflation eating into their budgets. Yet the job market and recovery from the COVID-19 recession are virtually unprecedented — especially when compared to the lagging comeback from the Great Recession, the scars of which were still being felt as the pandemic hit.

After the 2008 financial crisis, it took more than six years for the economy to regain all the jobs lost in that crash. But it only took a little over two years to return to pre-pandemic employment after the much deeper hole that COVID-19 punched in the economy in 2020.

The job market is still booming. The U.S. economy added 209,000 jobs in June, according to Bureau of Labor Statistics data released last Friday, slightly less than a month earlier but still on par with most monthly gains from earlier this year. The low unemployment rate fell to 3.6% in June, after rising slightly in May.

“The job market remains incredibly tight by any historical measure,” Aaron Terrazas, chief economist at Glassdoor, told Insider after Friday’s release.

Acting Labor Secretary Julie Su told Insider that it was “a very, very strong jobs report that indicates we are moving towards a place of steady and stable growth, which is key to a strong and resilient economy.”

The high inflation of the past year is likely to sour the economy for some Americans, but that’s steadily declining — hopefully paving the way for Americans to feel more optimistic and not so strapped for cash.

So why does everyone feel so bad? It may be because Americans have become so accustomed to wild economic swings that an easy transition to a new normal feels rocky — especially after a historically rapid recovery fueled by some of the most aggressive government financial support the US has ever seen.

Feelings about the economy don’t match the hard numbers

When measuring the economy right now, it can all come down to the baseline from which everyone is working. If you compare the current economy to how it was before the pandemic, it seems pretty good. But while that’s the tangent point many economists and journalists use as a reference, it’s probably not what most Americans compare it to.

According to the results of a Pew Research Center survey conducted earlier this year, about half of American adults rated economic conditions as “only fair.” More than a third rated the conditions as bad. Consumer confidence is still low, and, as JPMorgan Asset Management chief global strategist David Kelly writes, Americans are feeling an “unreasonable level of gloom.”

“While a gloomy consumer can still keep America growing, a lack of confidence can dampen economic growth and inflation, keeping the ‘soft’ in the ‘soft landing’ that seems more likely every day,” Kelly wrote.

Americans’ feelings about the economy have historically been linked to hard data like unemployment, inflation and stock prices, but in the COVID-19 era, that relationship has weakened. As Kelly explains, a statistical model using those numbers, along with the rate of job growth or job loss and gas prices, accounted for 70% of consumer confidence swings from February 1978 to December 2019.

But if the remaining months from January 2020 to June 2023 are added up, that figure drops to just 55%, showing that the relationship between the hard data economists look to to measure the economy and consumer confidence has weakened dramatically since the beginning of the the pandemic.

In short, the things that used to make Americans feel good or bad about the economy are no longer so consistent.

Even economists don’t know what to make of the new normal

While workers and consumers continue to feel bad despite mostly positive data, economists and market watchers are also struggling to interpret the latest developments.

“The professional economics observers and analysts, Fed and elsewhere, have this existential crisis of what’s good, what’s bad, and what can we know about the future?” Terrazas said.

A good example of how the new normal has changed experts’ views on the economy comes from Americans who work part-time but want to work full-time, a group whose numbers increased by nearly half a million in June. That’s certainly a pain point for workers, and one viewed with some concern by economists, but it’s still much better than what was common before the pandemic.

“We’ve really lost track of any idea of ​​what was normal before the pandemic; we’ve become really desensitized to what’s normal in recent years, I think,” Terrazas said. “If we had seen the number of part-time workers so low in 2018, 2019 for economic reasons, we would have been very happy.”

And so America’s economic recovery, which for many has included sustainable, living incomes for the first time in their lives, may have opened another Pandora’s box: American workers are still unaccustomed to the lashing of the mediocre economy of the 2010s to the brief sharp pandemic recession to the rapid return to today’s current strong but not red-hot labor market.