Scottish historian Thomas Carlyle is credited with describing economics as “the dismal science.” But in the current climate, it’s some economists who are upbeat and plenty of consumers with a dismal outlook.
“The typical American is better off today than in February 2020 and that is nothing short of a miracle,” Betsey Stevenson, professor of economics and public policy at the University of Michigan, tweeted on Nov. 24.
“The economy is great, but voters don’t believe it,” financial writer Felix Salmon and political writer Hans Nichols wrote for Axios on Nov. 9. They listed a series of financial gains, from job growth to stock market highs and rising household wealth.
Nonetheless, a Harris poll in October showed 68 percent of respondents felt their personal financial situations were the same or getting worse. (Seventy-seven percent of global respondents felt the same way.)
Jerome H. Powell, renominated as Federal Reserve chair last week, said “challenges and opportunities” come with the “unprecedented reopening of the economy.”
I’m going with “challenges.” Almost two years after the first covid-19 case was detected, the pandemic is still upending expectations, now with the omicron variant’s emergence.
“What is making us unhappy and angry is this sudden sense of loss that covid has imposed on us,” Donald Grimes, a University of Michigan expert on the regional economy, tells me. “We should be happy, but we definitely are not happy.”
That is affecting what people buy, according to a study of more than 7,000 people worldwide by Alix Partners, a global consulting firm. The pandemic’s impact has created what the study calls “the intentional consumer.”
Millions of people have reassessed their spending habits, says David Garfield, global leader of Alix’s consumer products practice. He sees “two different currents” emerging along socio-economic lines.
Higher-end consumers have cut out some purchases because they aren’t essential or don’t fit with their pared-back lifestyles. Lower-income shoppers aren’t spending because they can’t afford what they once could, whether from job losses or lost income. Or, now, inflation.
Even when the turbulence dies down, Garfield says, “some will snap back, and some won’t.”
The pandemic’s economic ramifications could be long-lasting. Like millions of people who lived through the Depression, my parents developed a sense of thriftiness that they never lost. My father, throughout his life, reflexively turned out lights in empty rooms; my mother declined invitations to Tupperware parties, preferring to reuse Imperial margarine plastic tubs.
Today, Americans see evidence of the turbulent economy wherever they turn. Here in Ann Arbor, Mich., I find countless examples within a five-minute drive from home. Gas prices have jumped this fall at Speedway. The Starbucks is now operating only from 8 a.m. to 3 p.m. and sometimes shuts all day without notice.
Busch’s Market had empty shelves last weekend where toilet paper is usually stocked. Our school system closed down the entire week of Thanksgiving, on top of planned days off, because of a covid-19 outbreak and staff shortages.
Those shots, which were supposed to return life to normal, haven’t been the magic potion many expected. Michigan now has its highest case rate of the pandemic, and officials are strongly urging a return to indoor masks and preventive measures.
This is especially tough on restaurant owners. Since opening Side Biscuit, his Ann Arbor wings shop in March, Jordan Balduf has endured numerous price increases, in some cases by 1,000 percent, he says. Orders he places for food and paper goods sometimes arrive half-filled, sending him running to local stores to supplement deliveries.
“It’s definitely frustrating and very difficult,” Balduf says.
But passing on his increased costs in the form of higher menu prices might alienate his mostly student clientele, Balduf says, so he tweaked his menu, adding chicken tender sandwiches, whose ingredients can be less expensive than wings.
Cafe owner Jenny Song has encountered similar headaches. She raised prices on the menu at one Songbird cafe last summer, reduced store hours and indefinitely closed her other cafe.
“Along with skyrocketing costs, there’s somehow a shortage of something every other week,” she says.
It’s tempting to hope that, as with the 1918 flu pandemic leading into the Roaring Twenties, this scourge will be followed by an economic boom. But if the Depression experience of Americans such as my parents is any indication, we could be feeling covid-19’s psychological aftermath for years, even decades, to come.
Economists shouldn’t be in too great a rush to call the recovery. Our comfort level, not their data, will determine that.