The electorate, we are told, is angry. They, or at least a significant subset of them, are upset about trade deals, immigration, feckless lawmakers, jobs, incomes and wages.
The data, estimated by the group Sentier Research and shown in the figure below, isn’t the government’s official measure, and it leaves out various income sources, like the value of medical benefits, but it’s a decent benchmark of market-based income for middle-class households. The measure is indexed to 100 in 2000 so the line tracks the percent change in real median income relative to that year.
* The percent of adults who say they’re “doing okay” or “living comfortably” has been improving overall in the past few years, as you might expect in an improving economy. But as the next figure, from a recent survey by the Federal Reserve, shows, the biggest gains have been for the group with “high-school or less,” the very people who are supposed to be most angry. Again, whussup?
* Finally, consumer sentiment, as shown below, is back to where it was at the peak of the last business cycle. Was everybody so darned annoyed back then? I don’t think so (at least until the housing bubble burst).
The unemployment rate’s at 5 percent (you can see its sharp decline in the first figure above), we’re adding more than 2 million jobs a year, and the Federal Reserve is talking about having to hit the economic brakes out of fear that the economy is growing too quickly (for the record, I think that would be a mistake). Them’s the facts, folks. Again, with all this going on, how is a negative vibe merchant like Trump gaining so much traction disparaging the current economy?
Well, let’s start by looking back at those figures.
The first one shows that market-based, middle-class incomes have just regained the ground they lost during the recession. And that level is about the same as it was in 2000. This same dynamic can be observed for consumer confidence. It’s back to where it was before the Great Recession, but below where it was in the late 1990s.
A closer look at the data from which the middle figure is derived also reveals of sources of economic discontent. Almost half of the adults responding to the survey (46 percent) said they’d have trouble coming up with $400 to cover an emergency expense. Almost a third (31 percent) of non-retirees report no retirement savings or pension. Among those who were having a hard time getting by in 2014, half say they were worse off in 2015.
In other words, for every statistic you can find, I can find one that tells if not a different story, a more nuanced one. Yes, the jobless rate is 5 percent, but the underemployment rate, juiced by 6 million part-timers who want full-time jobs, is a considerably less comfortable 9.7 percent. No question, wages are rising, but the major source of real income growth over the past year has been low inflation. Paychecks aren’t growing so fast as much as prices have been growing a lot more slowly.
Then there’s the geographical dimension to all of this. According to recent research by the Economic Innovation Group (I co-chair their advisory board), business and job growth have been a lot more concentrated in big cities than in non-urban areas. L.A., Miami and Brooklyn have been crushing it, both in terms of business formation and job growth; counties with less than 100,000 people were actually losing businesses, at least through 2014.
And then there’s a lot of stuff going on that doesn’t relate to the numbers. For decades, both Democrats and Republicans told people who were unquestionably being hurt by trade that globalization was good for them. Unemployment is low now, but full employment — truly tight labor markets that give middle and low-wage workers the bargaining power they otherwise lack — has been the exception, not the rule, over the past 30 years. The economics establishment failed to see or stop the housing bubble, generating a great movie and a horrible recession. Instead of doing real work, the House has voted over 60 times to repeal Obamacare. I might add, though it’s foreign, not economic, policy, that there were no WMDs in Iraq.
So I think I get why some people are unsatisfied with the economy and beyond. Growth hasn’t reached all corners by a long shot, and policymakers have too often been at best unresponsive to that reality and at worst, just plain awful.
You can go one of two directions with that insight. You can turn to a demagogue who exploits this disconnect without any coherent plans to do anything about it. Or you can get to work on the policy agenda that works to preserve what’s been going well and addresses what’s hurting us. I choose “b.”