Data Says: Economy Is Good! Survey Says: Americans Are Not Happy!

Chief Economist Eugenio J. Alemán discusses current economic conditions.

Survey after survey after survey has been indicating that Americans feel worse off today compared to the recent past, so much so that many of them indicate that the economy is currently in recession, that the rate of unemployment is the highest in several decades, that inflation is very high today, etc. It is as though Americans have been hit by an incoming train, heads on.

The truth is that things have been improving. But for many Americans, current economic conditions continue to be worse than before the pandemic. Inflation is probably one of the reasons why Americans are feeling worse today. But it is not because inflation is still high—it is not. The problem is that the price level—which is not the same as the rate of inflation—is much higher today than it was before the pandemic. But so are wages and salaries.

Still, the stress felt by many American families is both understandable and real. Think about it, for several decades American families were used to shopping without even considering what was happening to prices because the change in prices—that is, the rate of inflation—was so low that we did not spend much time trying to figure out when, where, what, and how to buy goods and services. However, because prices increased so fast and by so much over the last several years, a typical American family has had to search and consider several alternatives to spending their hard- earned income. This search process is, sometimes, very stressful. How stressful, you may ask? For many families, making a bad purchase decision could mean not being able to make ends meet.

Furthermore, higher inflation not only affects our ability to buy goods and services, but it also affects relative prices. That is, the price of one good compared to the price of a different good because not all goods/services prices in the economy increase at the same rate.