U.S. Economy January 2024-

Heather Cox Richardson June 23, 2024
On Thursday, Moody’s Analytics, which evaluates risk, performance, and financial modeling, compared the economic promises of President Joe Biden and presumptive Republican nominee Donald Trump. Authors Mark Zandi, Brendan LaCerda, and Justin Begley concluded that while a second Biden presidency would see cooling inflation and continued economic growth of 2.1%, a Trump presidency would be an economic disaster.
Trump has promised to slash taxes on the wealthy, increase tariffs across the board, and deport at least 11 million immigrant workers. According to the analysts, these policies would trigger a recession by mid-2025. The economy would slow to an average growth of 1.3%. At the same time, tariffs and fewer immigrant workers would increase the costs of consumer goods. That inflation—reaching 3.6%—would result in 3.2 million fewer jobs and a higher unemployment rate.

8 September
Harris reveals her own economic vision: It’s not Bidenomics.
By Jennifer Rubin
Kamala Harris, in forging her economic policies, shows she’s a daughter of Silicon Valley, not Scranton.
(WaPo) … For starters, she has defined her economic philosophy by what she is not proposing. She fully supports the Affordable Care Act, eschewing more progressive plans for Medicare-for-all. (Her stint in the vice presidency informed her belief that the latter was unnecessary; expansive and affordable coverage, if properly administered, is more than sufficient to move toward universal coverage.)
Likewise, huge investments and incentives in green energy make a fracking ban unnecessary. “My values have not changed,” she explained in a recent CNN interview, pointing to the achievements in the Inflation Reduction Act. “What we’ve already done creating over 300,000 new clean energy jobs. That tells me from my experience as vice president we can do it without banning fracking.”
In addition, her plans to lower food and housing costs do not include extreme measures such as price controls. To the disappointment of critics ready to pounce on her for potentially disastrous efforts to micromanage pricing, she shied away from such measures. Rather, she is determined to prevent anti-competitive prices that distort the market to the detriment of ordinary Americans.
Moreover, Harris promised in the housing market to cut red tape that slows development and to give tax breaks. CNN reported: “To spur construction, Harris would provide a first-ever tax incentive for builders who build starter homes sold to first-time buyers. She also would expand an existing tax incentive for building affordable rental housing and create a $40 billion fund for innovative housing construction.”
On tax policy, her proposal for capital gains tax increases would be a much more modest step than Biden’s, who pushed for equalizing the rate between capital gains and ordinary income.

26 August
Paul Krugman: Inflation Is Fading, Statistically and Politically
… there was another important speech on Friday: Federal Reserve Chair Jerome Powell’s talk at Jackson Hole, Wyo.
Yes, Powell’s remarks were of particular interest to investors looking for clues about future monetary policy. But even though his speech was rigorously apolitical, it had important political implications. For what we’re seeing, I’d argue, is inflation fading away — not just in the data, but also as a political issue. And that, of course, is very good news for Democrats.
About Powell’s speech: He noted that the inflation rate has declined a lot since it peaked in 2022 and expressed confidence that it’s on track to reach the Fed’s target of 2 percent — and why it’s getting there without the mass unemployment some economists had claimed would be necessary. Falling inflation all but guarantees that the Fed will cut interest rates at its Open Market committee meeting next month, although the size of the anticipated cut is uncertain.
What has brought inflation down? Like many economists, myself included, Powell believes that inflation was largely caused by “pandemic-related distortions” and that “the unwinding of these factors took much longer than expected but ultimately played a large role in the subsequent disinflation.”

22-24 August
All eyes on the annual Jackson Hole Economic Symposium
(Quartz) This year’s Jackson Hole theme is “Reassessing the Effectiveness and Transmission of Monetary Policy.”
23 August
Powell Speaks the Words and Restores Order on Wall Street
(Bloomberg)  … “The time has come for policy to adjust,”  Fed Chair Jerome Powell said in a speech during the annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.” His most decisive signal yet that his inflation-fighting mission has been accomplished helped restore order to markets just a few weeks after weaker-than-expected labor data, among other things, triggered a mini-panic. Now the return to calm is creating new riches on Wall Street. The S&P 500 climbed within 1% of an all-time high Friday. Exchange-traded funds tracking Treasuries and corporate bonds shot up. And the VIX index, Wall Street’s fear gauge, settled comfortably below levels denoting nervousness.
Fed chair Powell: ‘The time has come’ for interest rate cuts
The Federal Reserve is ready to cut interest rates, confident that inflation is easing to normal levels and wary of any more slowing in the job market.
(WaPo) “The time has come for policy to adjust,” Fed Chair Jerome H. Powell said Friday, in his most anticipated speech of the year. “The direction of travel is clear.”
After years of fighting dangerously high inflation, Powell, in his speech at the Jackson Hole Economic Symposium, shifted notably toward the job market, which he said “has cooled considerably.” Officials have been able to justify keeping rates at the highest level in more than 20 years, in part because they weren’t seeing consequences for workers.
Now, the balance of risks has shifted from rising prices to a weakening labor market — cementing the case for rate cuts.

22-23 August
Can Harris’s ‘opportunity economy’ win back ‘Bidenomics’ doubters?
Nicholas Sargen
The proposed measures in her “Opportunity Economy” program are aimed at tackling high grocery bills, the cost of raising a family and home affordability. They include targeting companies that make “excessive “ profits on food and groceries, lowering the cost of expensive medications, increasing the child tax credit for middle-class and low-income families and creating tax incentives to encourage new home construction and subsidize first-time home buyers.
Harris Thankfully Inherits Biden’s Economy in North Carolina
The vice president has essentially closed the gap with Donald Trump in this critical state, where jobs are being created by the thousands.
By Matthew A. Winkler, editor in chief emeritus of Bloomberg News
… Now that she is the Democratic Party’s standard bearer, Harris, like Biden, wants to protect Americans from Trump and his enablers calling for tariffs on foreign-made goods by making the cost of living, especially housing, more affordable. Her policies are an extension of the American Rescue Plan Act of 2021 that sparked the labor market recovery to the longest period of low unemployment since the 1960s; the Infrastructure Investment and Jobs Act of 2021 that paved the way for road and bridge building; the Chips and Science Act of 2022 subsidizing the manufacturing of semiconductors inside the US; and 2022’s IRA (Harris cast the deciding vote) that includes financing for clean energy projects promising to create even more jobs.

20 August
The US Treasury’s Backdoor Stimulus Is Hampering the Fed
Nouriel Roubini and Stephen Miran
(Project Syndicate) The US Federal Reserve has moved mountains to control inflation, which in July fell below 3% for the first time since 2021. Unfortunately, the Fed finds itself working at cross purposes with the US Treasury, whose debt-issuance strategy has been providing backdoor interest-rate cuts, keeping inflation above the Fed’s target range.

15-16 August
Harris has proposed a slew of economic policies. Here’s a look at what’s in them
(AP) — Vice President Kamala Harris is out with a string of new economic proposals focused on food prices, taxes, housing and medical costs that she says will empower the middle class.
WATCH: Harris debuts economic proposals to lower costs for Americans
The plans constitute the first major policy proposals that Harris has released in the nearly four weeks since President Joe Biden bowed out of the race and endorsed his vice president.
Harris unveils economic agenda to combat soaring grocery and housing prices
(PBS) In her first major policy speech since becoming the Democratic presidential candidate, Vice President Kamala Harris laid out her vision for combatting rising prices, one of the biggest issues for voters in this year’s election and one that’s dogged the Biden-Harris administration
Brooks and Capehart on Harris’ economic policy proposals
David Brooks:
(PBS Newshour) …she has some good policies in this package. I think the child tax credit is a good thing. She wants to deregulate housing, so we can get more homes.
But the price gouging is just — well, Catherine Rampell, The Washington Post columnist and a “News Hour” contributor, said it’s impossible to exaggerate how bad this policy is. And I agree with that.
…price controls just create shortages. They create black markets. We have seen it happen in Venezuela. We have seen it happen in the Soviet Union. Price controls just don’t work.
What’s worse about that, first, it’s trying to address a problem that does not exist. Price — grocery prices, inflation has been less than 1 percent for the past year. It’s over. We had a surge, but it’s over. The problem does not exist.
But the real core problem is it expresses a level of economic illiteracy which is kind of surprising in a responsible Democratic candidate. …
That’s not why inflation surged. Inflation surged because we had a pandemic which screwed up supply chains and productivity. Then the Biden administration overstimulated the economy, too many dollars chasing too few goods. Obama administration official Larry Summers and Jason Furman said at the time, this is going to cause inflation.
Bloomberg: A flurry of data affirming US economic resilience has driven stocks to their best week this year, with dip buyers stepping in after a recent rout. Equities rose on Friday with the S&P 500 extending a seven-day rally to 6.8%—the best performance in such a span since October 2022. The stock market halted a streak of four weeks of losses that had been partially driven by concern the Federal Reserve wouldn’t reduce borrowing costs fast enough to keep from overshooting the economic runway. But new data this week put frightened investors to shame, showing ebbing inflation and a resilient consumer—hallmarks of the central bank’s goal of a soft landing
Harris unveils part of her emerging economic platform at North Carolina rally
Vice President Kamala Harris announced a sweeping set of economic proposals Friday meant to cut taxes and lower the cost of groceries, housing and other essentials for many Americans, declaring, “Look, the bills add up.”
(AP) During a speech in the battleground state of North Carolina, Harris said “building up the middle class will be a defining goal of my presidency” while promoting her plan for a federal ban on price gouging on food producers and grocers. She also proposed $25,000 in down payment assistance for certain first-time home buyers and tax incentives for builders of starter homes.
She stressed tax breaks for families, as well as middle- and lower-income people, and lower health insurance premiums through the Affordable Care Act.
Kamala Harris unveils populist policy agenda, with $6,000 credit for newborns
The vice president endorses government action on housing, groceries, medical debt, drugs and other issues.
(WaPo) Vice President Kamala Harris on Friday unveiled an aggressively populist economic agenda, providing the most detailed vision yet of her governing priorities since becoming the Democratic Party’s presidential nominee.
Ahead of Harris’s speech in North Carolina, her campaign announced her support for more than a dozen economic policies aimed at “lowering costs for American families,” including some that went beyond what President Joe Biden had promised.
The most striking proposals were for the elimination of medical debt for millions of Americans; the “first-ever” ban on price gouging for groceries and food; a cap on prescription drug costs; a $25,000 subsidy for first-time home buyers; and a child tax credit that would provide $6,000 per child to families for the first year of a baby’s life.

Biden, Harris say seniors will see lower prices for diabetes, heart medications
Thursday’s announcement followed a year-long effort by the Biden administration to negotiate with pharmaceutical companies over some of the priciest drugs used by older Americans.

14 August
Core US Inflation Eases a Fourth Month, Sealing Fed Rate Cut
(Bloomberg) US inflation fell below a crucial threshold as it nears the end of a long trip back from the catastrophic coronavirus pandemic and its economic aftermath. Wall Street dutifully rejoiced. Stocks rose after an inflation report further solidified bets the Federal Reserve will start cutting rates in September. The S&P 500 extended its advance into a fifth straight day, the longest winning streak in more than month. Most of its major groups gained, with financial, energy and tech shares leading the way.

8 August
The Swing-State Economic Realities Shaping the US Election
Battleground states in this year’s presidential race present a challenge for Kamala Harris and an opening for Donald Trump.
(Bloomberg) …the economy that matters most isn’t national: It’s in the seven swing states poised to decide the race.
That group is home to 61 million people and had a combined gross domestic product in 2023 of $4.4 trillion, an output rivaling Germany’s. And it’s showing some economic cracks that could prove a political obstacle for Vice President Kamala Harris, who will have to answer to voters for the record of President Joe Biden’s administration.
In the so-called Blue Wall industrial states — Michigan, Pennsylvania and Wisconsin — where the political stakes are now highest, the combined growth from 2019 to the end of 2023 was just a third of that seen outside swing states, once you adjust for inflation and population increases.
In Arizona, which has enjoyed strong real GDP per capita growth, inflation and soaring housing costs hit household budgets hard, much as they have in Nevada and North Carolina. Georgia has benefited from new investments in electric vehicle plants, but it’s also seen its growth diluted by a swell of new residents.
Those burdens help explain why Biden struggled to get his economic message to resonate in these critical states, even as the US unemployment rate sat near historic lows, inflation cooled, and the country’s recovery from the pandemic downturn became the envy of much of the world.
Democrats will court voters on a wide range of issues, including abortion and the future of US democracy, and Harris’ move to the top of the ticket has galvanized their base. But the mixed picture in swing states underscores a hard truth for the party: National data may point to a healthy US economy, but voters’ perceptions of it are heavily shaped by conditions on the ground where they live.

2-5 August
Robert Reich: Another Black Monday?
What really happened today on Wall Street
“Stock markets are crashing, jobs numbers are terrible, we are heading to World War III, and we have two of the most incompetent ‘leaders’ in history,” Trump bloviated this morning.
Rubbish. The United States is not facing imminent recession. The American economy is still growing. There is no reason to panic.
Trump and his lackeys would like an economic panic because nothing else they’ve thrown at Kamala Harris is working.
In truth, Fed chair Jerome Powell — who Trump first appointed in 2018 —should have begun cutting interest rates at the Fed’s last meeting rather than waiting until September.
The Fed’s current 5.3 percent prime rate is too high. The Fed’s goal of 2 percent inflation is too low.
But there’s no reason for the Fed to make an emergency rate cut right now. Doing so might be seen as a sign that the Fed is worried about the economy falling into recession, which itself could cause a panic.
The other variable affecting markets is the Middle East. The world is justifiably worried about that tinderbox — and Netanyahu’s insistence on holding power by escalating warfare.
… the stock market is not the real economy, anyway. The richest 1 percent of Americans own more than half of all the shares of stock owned by Americans. The richest 10 percent own over 90 percent.
The real economy consists of average working people. Their spending determines whether and how fast businesses hire more workers.
Lower-income people have been especially hurt by high interest rates — which have raised credit-card fees, car loans, mortgages, and rents.
Last Friday’s slower-than-usual jobs report for July provides evidence. Employment slowed in July because the paychecks of average working people aren’t going far enough to keep employers hiring.
One reason paychecks aren’t going far enough is that interest rates are still too high.

U.S. Stock Market Sees Biggest Daily Drop in Nearly 2 Years
(NYT) Stocks on Wall Street suffered their sharpest decline in nearly two years on Monday, tracking a global rout that came as investors zeroed in on signs of a slowing American economy.
Monday’s drop extended a sell-off that had begun last week, after the U.S. jobs report on Friday that showed significantly slower hiring, with unemployment rising to its highest level in nearly three years. This deepened fears that the world’s largest economy could be slowing sharply and that the Federal Reserve may have waited too long to cut interest rates.
U.S. stocks tumbled after markets, rattled by reports of a slowing American economy, recorded heavy declines in Asia and Europe.
The S&P 500 fell 3 percent, its worst day since September 2022. This drop brings the index down 8.5 percent from an all-time peak in July – but it’s still up 8.7 percent in 2024 overall.
Jolted by Soft Jobs Report, Stocks Tumble to End a Turbulent Week
The report on hiring in July added to worries about the economy. Stocks fell sharply, and Treasury yields declined in expectation of a Federal Reserve rate cut.

31 July
Fed’s Powell puts September rate cut on table as US inflation cools
Central bank leaves policy rate in 5.25%-5.50% range
Investors see Fed as ‘locked and loaded’ for September cut
Fed to hold next meeting seven weeks before U.S. elections
Powell says decision to be driven by data, not politics
(Reuters) – Federal Reserve Chair Jerome Powell said on Wednesday interest rates could be cut as soon as September if the U.S. economy follows its expected path, putting the central bank near the end of a more than two-year battle against inflation but square in the middle of the nation’s presidential election campaign.
… Republican lawmakers warned in a hearing with Powell in July that a rate cut at the Sept. 17-18 meeting, seven weeks before the U.S. elections, could be seen as a politicized move – highlighting progress on inflation and offering the mood-lifting promise of cheaper credit and home mortgages in the near future.
The Fed chief, in response to a question from a reporter on Wednesday, said the central bank’s only consideration was the state and direction of the economy and the progress of inflation back to its 2% annual target, not the political calendar or any party’s fortunes.

10 April
Inflation is sticking around it seems. A key US price gauge topped forecasts for a third straight month thanks to rising rent and transportation costs. The so-called core consumer price index—which excludes food and energy—increased 0.4% from February. Paired with recent reports showing continued good news for American workers (labor market and economic activity remain strong), investors no longer see much chance that the Federal Reserve will start easing anytime soon. Wall Street on Wednesday responded accordingly. Forecasters have been waiting for a deceleration based on leading indicators, but progress has more or less stalled over the past nine months. “The sound you heard there was the door slamming on a June rate cut,” said David Kelly, JPMorgan Asset Management’s chief global strategist. “That’s gone.”

5 April
U.S. Job Growth Much Stronger Than Expected
Employers added 303,000 jobs in March, the 39th straight month of growth. The unemployment rate fell to 3.8 percent.
An earthquake … in the labor market
Paradoxically, one of the factors propping the economy up is also one of the top issues that has soured Americans on Biden: the surge of immigration, both legal and illegal, over the past couple of years. “Economists think that as immigration adds to the labor supply, job growth can remain strong without overheating the economy,” NYT’s Jeanna Smialek reports. High immigration might also help reduce deficits, Semafor’s Jordan Weissmann reports, and it helps explain why the U.S. has outstripped its peer countries in the post-pandemic recovery.
The upshot is another very strong outlook for the U.S. economy — and a boost for President Biden, who’s still working to yank Americans’ perceptions of the economy out of the gutter. Biden’s White House statement trumpeted “the milestone of 15 million jobs created since I took office.” It’s now looking likelier that the Fed has mostly achieved its soft landing of bringing down inflation without tanking the economy, and that we’ve “reached a healthy equilibrium in which a steady roll of commercial activity, growing employment and rising wages coexist,” NYT’s Talmon Joseph Smith reports.
“This report is like the macroeconomist’s Holy Grail,” one economist tells the AP.

31 March
Baltimore braces for economic hit amid fears port shuttered for months
Some fear business that shifts to other ports may go for good
With the shipping channel clogged with debris, the people and businesses who depend on the port for their living are in limbo. The docks will soon be clear of cargo, and no more will be arriving anytime soon. Logistics and freight companies as well as retail businesses are bracing for a lengthy interruption in port operations that could exact a steep financial toll.
… clearing the stricken vessel and ruined bridge will not be quick or easy. This temporary cargo halt could become one of the greatest blows to Baltimore’s maritime prosperity since the city emerged as a commercial gateway with the tobacco trade in the 1600s.
For the United States as a whole, the port closure will have “no significant effects” on economic growth or inflation, according to Capital Economics. But it is a cataclysm for the regional economy and for hopes of adding blue-collar jobs. Some freight and transport executives compared the situation to other epic disasters.

26-28 March
Economic impact of the Baltimore bridge collapse (podcast)
(Brookings) The wreckage of the bridge now sits in the channel that connects Baltimore Harbor to the Chesapeake Bay, effectively closing the Port of Baltimore. Here to talk about the impacts of that closure on our economy and prospects for rebuilding the bridge is Joe Kane, a fellow in Brookings Metro
An important aspect that a lot of people don’t talk about is Baltimore is actually, among East Coast ports, it’s the closest geographically to the Midwest. So, so even if some of that traffic is diverted to other East Coast ports—, Philly might be and then obviously, Port of New York, New Jersey—it doesn’t change the fact that Baltimore still has a strategic location in terms of our freight networks to reaching some of those inland destinations too. So, just because the vessel and container traffic might be shifting on the coast, doesn’t change the fact that truck traffic in particular has to go in different routes to inland. …that’s just something to bear in mind as obviously all this is unfolding in real time.

Rebuilding Baltimore’s Key Bridge will likely take years, experts say
Rebuilding the Francis Scott Key Bridge over the Patapsco River will probably take years and cost hundreds of millions of dollars, experts said. But the shipping channel from the Port of Baltimore, a major economic engine for the city, could be cleared in months.
Rep. David Trone (D-Md.), a member of the House Appropriations Committee, said lawmakers were exploring the use of “quick release” emergency relief funds to aid in the effort in partnership with Transportation Secretary Pete Buttigieg and the “urgent deployment of congressionally approved funding.”
Baltimore Bridge Disaster to Test Shock-Worn Supply Chains
(Bloomberg) The US economy has withstood a series of supply chain shocks over the past five years, none more sudden and visibly dramatic than the container ship that slammed early Tuesday into Baltimore’s Francis Scott Key Bridge, sending large spans of the nearly 50-year-old steel structure tumbling into the river below.
Watch for a change in the directional flow of goods. Flexport CEO Ryan Petersen said importers will likely want to send their cargoes through West Coast ports and move them on trains eastward to avoid any bottlenecks at East Coast ports. Many were doing so already to avoid potential disruptions involving East Coast dockworkers in contract negotiations this year.
Chris Rogers, head of supply chain research at S&P Global Market Intelligence, said “bridge reconstruction and cargo delays are likely to be extensive,” though the diversions should help soften the economic blow.
Baltimore Bridge Collapse Will Redirect Cargo Across the US
Expect logistics snarls, no major economic hit, analysts say
Ports along US East Coast stand ready to help absorb shock

12 March
Prices ticked higher in February, but there’s good news at the grocery store
CNN — Higher prices at the gas pump pushed up inflation more than expected in February, according to the latest Consumer Price Index from the Bureau of Labor Statistics.
However, inflation did slow in other key areas like food and housing, fueling a touch of positive news for the Federal Reserve and consumers alike.
higher gas prices, airfares and shelter costs helped propel inflation, though Americans got some relief at the supermarket: Overall grocery prices didn’t increase at all last month. Despite the slight disappointment of today’s report, which could reinforce the Fed’s caution around cutting interest rates, the overall inflation picture for this year remains the same: Experts think it will fall slowly if bumpily over the course of the year, ticking closer to the central bank’s 2% target.

27 February
Two Theories for Americans’ Dire Economic Outlook
A conversation with Rogé Karma about what economic measures fail to grasp
By Lora Kelley
(The Atlantic) … Rogé: There are two dominant theories about the current gap between economic sentiment and the economic fundamentals. Theory No. 1 has to do with what we’ve been talking about: prices. The idea here is that people have a different conception of inflation than many economists do, but over time, people will get used to higher prices, especially because the rate of inflation has come down a lot, and start feeling better about the economy.
The second theory is that maybe the things that are driving people’s perceptions of the economy have nothing to do with the economy at all. Maybe it has to do with other factors, like partisanship or media negativity, and therefore, no matter how much prices get better, we might not actually see consumer sentiment continuing to recover.
Lora: What role does political partisanship play in how people view the economy?
Rogé: It is obvious that we are living in a time of extreme political polarization and that basically everything that happens, we filter through our partisan lenses. Partisans on both sides report feeling suddenly much more negative about the economy when someone from the other party is president, and more positive about the economy when their own party is in office;
… A lot of the reason we might see sentiment not recovering to where it was during the Trump years is because Republicans aren’t going to admit the economy is good, no matter how much better it gets. At the same time, it is curious that Democratic consumer sentiment is still well below the later Obama years. Over the past decade, we’ve seen a real shift in how Democrats think about the economy. The idea that the economy is rigged, that capitalism is a broken economic system, has become central to how progressives think, particularly younger Democrats.

22 February
David Brooks: The Political Failure of Bidenomics
…in 2020 the Democrats did something sensible. For the first time in 36 years, they nominated a presidential candidate who did not have a degree from Harvard or Yale. Joe Biden won the White House and immediately pursued an ambitious agenda to support the working class.
The economic results have been fantastic. During Biden’s term, the U.S. economy has created 10.8 million production and nonsupervisory jobs, including nearly 800,000 manufacturing jobs and 774,000 construction jobs. Wages are rising faster for people at the lower end of the wage scale than for people at the higher end.
A study [Employment Impacts of New U.S. Clean Energy, Manufacturing, and Infrastructure Laws] by the economist Robert Pollin and others estimated that 61 percent of the jobs created by the infrastructure law Biden championed wouldn’t require a college degree; the same applied for 58 percent of the jobs created by the Inflation Reduction Act and 44 percent of those created by the CHIPS act.
—Biden’s economic policies have done little to help the Democratic Party politically. In fact, the party continues to lose working-class support.
—Some of the loss of support is happening among some of the party’s historically most loyal constituencies.
—the diploma divide is still widening. Those with postgraduate degrees are increasingly turning Democratic; those without college degrees are increasingly Republican.
Franklin Roosevelt built the New Deal majorities by using government to support workers. Biden has tried to do the same. While his policies have worked economically, they have not worked politically. What’s going on?
The fact is that over the past few decades and across Western democracies, we’ve been in the middle of a seismic political realignment — with more-educated voters swinging left and less-educated voters swinging right. This realignment is more about culture and identity than it is about economics.
College-educated voters have tended to congregate in big cities and lead very different lives from voters without a college degree. College-educated voters are also much more likely to focus their attention on cultural issues like abortion and L.G.B.T.Q. rights, and they are much more socially liberal than non-college-educated voters. …
Trudeau, Biden and the ‘joyless prosperity’ challenge
(GZERO North) “On paper, both economically and legislatively, Joe Biden has been a very successful president,” says pollster Nik Nanos, of Nanos Research. “But the thing is that the polarization, the exceptional polarization that we’re seeing in the United States, there’s nothing that he can do.”
Voters remain unconvinced
US inflation numbers in January were slightly higher than expected, but other economic measures are between good and great. Consumer confidence has reached its highest level since December 2021, and GDP and employment numbers are strong. Still, only 33% of voters approve of Biden’s handling of the economy, and his approval rating is negative.
Republicans can’t be convinced that Biden’s economic policies are working. Researchers at Stanford University have found [Asymmetric amplification and the consumer sentiment gap] that Republicans are two and half times more partisan in their view of the economy than Democrats, meaning they think times are good when a Republican is in the White House and bad when the president is a Democrat. But the researchers’ models show that even partisan bias doesn’t explain all of the current negativity.
What’s new is social media, which amplifies negative messages and convinces people of things that aren’t true. Voters are entitled to be grumpy about cost-of-living increases, but many think things are much worse than they are.

16 February
Liberals Dreamed of This EBidenomicsconomy For Decades. What If Voters Don’t Like It?
Victoria Guida
Policymakers were determined to avoid the mistakes of the Great Recession — and they succeeded. But now they are in a mood of “fear and introspection.”
This is the future liberals wanted.
For years, economic thinkers on the left pushed for more government spending and urged the Federal Reserve to be less paranoid about inflation, with the goal of driving down unemployment as low as possible
Their logic: Workers would have more leverage to demand higher wages, as employers competed for employees. With higher incomes, people would be able to spend more, which would fuel the economy by creating demand for goods and services. It could also yield higher productivity, as companies invested in technology to better meet demand.
Higher wages, higher growth, higher productivity. Win-win-win.
There’s a chance we’re headed down that exact path, and yet, Americans don’t seem very enthused.
Because they really hate inflation.
For the coalition that has supported this agenda — Democrats to the left of Larry Summers, along with economists representing a range of ideologies — the economy today is a policy success more than a decade in the making. And the fact that it hasn’t yet translated into political success is a worrying challenge for them and President Joe Biden.
Rather than enjoying a victory lap, the people who oversaw this recovery — in the administration, the Fed, Congress and the worlds of academia and economic think tanks — are being asked to explain the disconnect between the economic data and the polling.

13 February
Strategic sector investments are poised to benefit distressed US counties
Joseph Parilla, Glencora Haskins, Lily Bermel, Lisa Hansmann, Mark Muro, Ryan Cummings, and Brian Deese
(Brookings)
Spurred in part by three significant pieces of federal legislation, since 2021, the United States has experienced an investment surge in “strategic sectors,” defined as clean energy, semiconductors and electronics, biomanufacturing, and other advanced industries.
So far, economically distressed counties are receiving a larger-than-proportional share of that investment surge relative to their current share of the economy. With comparatively low prime-age employment rates and median household incomes, these counties account for about 8% of national GDP but have received 16% of announced strategic sector investments since 2021.

Heather Cox Richardson: February 1, 2024
One of the biggest stories of 2023 is that the U.S. economy grew faster than any other economy in the Group of 7 nations, made up of democratic countries with the world’s largest advanced economies. By a lot. The International Monetary Fund yesterday reported that the U.S. gross domestic product—the way countries estimate their productivity—grew by 2.5%, significantly higher than the GDP of the next country on the list: Japan, at 1.9%.
IMF economists predict U.S. growth next year of 2.1%, again, higher than all the other G7 countries. The Federal Reserve Bank of Atlanta projects growth of 4.2% in the first quarter of 2024.
Every time I write about the booming economy, people accurately point out that these numbers don’t necessarily reflect the experiences of everyone. But they have enormous political implications.
President Joe Biden, Vice President Kamala Harris, Secretary of the Treasury Janet Yellen, and the Democrats embraced the idea that using the government to support ordinary Americans—those on the “demand” side of the economy—would nurture strong economic growth. Republicans have insisted since the 1980s that the way to expand the economy is the opposite: to invest in the “supply side,” investors who use their capital to build businesses.

Heather Cox Richardson: January 25, 2024
Today a report from the Bureau of Economic Analysis showed strong economic growth of 3.3% in the U.S. in the fourth quarter of 2023, setting growth for the year at 3.1% (by comparison, in the first three years of Trump’s term, before the pandemic, growth was 2.5%). A year ago, economists projected that the U.S. would have a recession in 2023, and forecast growth of 0.2%.
Meanwhile, unemployment remains low, wages are high, and inflation is receding. As Gabriel T. Rubin put it in the Wall Street Journal today, “The final three months of the year looked a lot like the soft landing Fed officials are seeking to achieve.”
There is a major political story behind this impressive economic one. Since 1981, lawmakers have insisted that cutting taxes, regulation, and the social safety net would create much faster and more efficient growth than was possible under the system in place between 1933 and 1981.
US Economy Booms Along Path to Soft Landing
(Bloomberg Evening Briefing) The US economy continued its seemingly unstoppable ascent out of the pandemic recession and its inflationary aftermath, further burying wrong calls of recession by posting fourth-quarter growth numbers that crushed forecasts. Cooling inflation has fueled consumer spending amid continued, near-record low unemployment and rising wages. The economy’s main growth engine—personal spending—rose at a 2.8% rate while business investment and housing also helped fuel the larger-than-expected advance. A closely watched measure of underlying inflation rose only 2% for a second straight quarter, in line with the Federal Reserve’s target and its plan for a soft landing. Meanwhile, Americans who have voiced negativity in the face of an economy that’s been firing on all thrusters may be finally coming around, as consumer sentiment begins to rise. Wall Street cheered.

14 January
Why are Americans so gloomy about their great economy?
Inflation, partisanship and the pandemic have made them glummer than the numbers suggest they should feel
(The Economist) Why are Americans so fed up with their economy? A year ago, a recession was widely expected. Instead the economy grows. Inflation is painful, but did not hit the heights that Europeans endured, for example. And the jobs market remains pretty strong. You might think people would be relieved, even happy, that their big economy continues to outperform most others. As our new article sets out today, however, things aren’t as simple as that.
“The vibes are off” is a phrase that does not usually appear in rigorous economic analysis but has cropped up again and again in serious discussions about America over the past year. From an array of hard data, there is reason to think that people ought to be quite satisfied about the state of the economy: inflation has slowed sharply, petrol prices are down, jobs are plentiful, incomes are rising and the stock market is strong. But survey after survey suggests that Americans are in fact quite unhappy. They think that the economy is in bad shape and that President Joe Biden is mismanaging it. What gives?
Start with the evidence of gloom. The figure watched most closely by economists for an idea of what people are feeling is a consumer-sentiment index from the University of Michigan. For the past two years it has bounced around at levels last seen during the global financial crisis of 2007-09. Even with an improvement in December, it is still 30% below its recent peak on the eve of the covid-19 crisis in early 2020.

13 January
The economy is improving under Biden. But many voters aren’t giving him credit.
(WaPo) By many measures, the U.S. economy is a great success story — recession fears have fallen, along with gas prices and the unemployment rate, while manufacturing construction is up along with nominal wages and the stock market. The United States has grown faster since covid-19 than any peer country. Gas prices, once averaging over $5 a gallon, are now approaching $3. The Federal Reserve projects three interest rate cuts in 2024 that could help buyers like Busby.
But the kitchen-table experience of Biden’s first term — a roller coaster of covid adjustment and international shocks — has meant that many voters have experienced the last few years as a time of relative economic hardship. Despite rising wages, voters as a group lost spending power during 2021 and 2022 and have only recently climbed out of the hole.

5-10  January
Why are Americans down on the economy despite its apparent strength?
Recent economic data indicate the U.S. is enjoying a robust jobs market, steady economic growth, and cooling inflation following the short recession owing to the COVID-19 pandemic. Yet, according to polling data, attitudes towards the economy are not improving and many households report a general dissatisfaction with the state of the economy. There seems to be a disconnect between the state of the economy and Americans’ sentiment, so what is causing the divide and why does it matter?
On January 10, the Economic Studies program at Brookings convened an event to discuss why Americans are down on the economy despite its apparent strength. Jason Furman, Harvard Kennedy School economics professor and former chair of the Council of Economic Advisers, opened the event. Following his framing remarks, Sara Eisen, CNBC’s “Squawk on the Street” and “Money Movers” co-anchor, moderated a conversation with University of Michigan economics professor and Brookings nonresident fellow Justin Wolfers, Wall Street Journal Chief Economics Commentator Greg Ip, and The Conference Board’s chief economist Dana Peterson.
Why are Americans so displeased with the economy?
Measuring whether economic news has become more negative
Ben Harris and Aaron Sojourner
(Brookings) The seeming disconnect between consumer sentiment and the state of the macroeconomy has been a defining characteristic of the post-COVID economy. By most widely accepted measures, the state of the macroeconomy is historically robust: The topline unemployment rate has remained below 4% for the past two years, economic growth has been steady and recovered pandemic-era losses, and inflation has retreated to historical norms.
This apparent strength notwithstanding, various measures of household and consumer sentiment suggest a persistent dissatisfaction with the state of the economy. Less than one-quarter of registered voters surveyed by the Wall Street Journal in August 2023 answered that the economy was headed in the right direction. The Michigan Index of Consumer Sentiment is roughly in-line with levels reported during the heart of the Great Recession in 2009, while the share of respondents in a Pew poll with a positive view of the economy was roughly halved between 2016 and today.
Explanations for the gap between sentiment and economic fundamentals
The disconnect between sentiment and macroeconomic performance has given rise to a host of plausible explanations. A subset of these explanations relates to dissatisfaction over the current state of the economy and future economic opportunities. This includes persistently elevated inequality, the higher level of prices owing to elevated post-pandemic inflation, a widespread lack of affordable housing, and a loss in faith about future economic prospects—including concern over the negative impact of artificial intelligence on quality jobs. Yet, this theory of dissatisfaction does not explain why, on the whole, the many positive elements of the macroeconomy do not seem to influence consumer sentiment as much as more limited negative elements.