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No, the Economy Isn’t Tanking

No, the Economy Isn’t Tanking
No, the Economy Isn’t Tanking


The illusion persists, despite all evidence. Americans are pessimistic about the economic future. They feel worse off than their parents were. Poll after poll shows that at best, only 20 percent of Americans say the economy is doing better than it was a year ago. More than 20 percent of Americans are doing better than they were a year ago, by many measures: Unemployment is lower. Wages are growing. Inflation is declining. This is true for Americans across ages and classes. These are tangible improvements in household income that should be cheering people up. And still, they are not. Why? What tricks are our minds playing on us that we can’t feel hopeful?

In this episode of Radio Atlantic, I interview Gilad Edelman, a senior editor at The Atlantic who covers the economy. Edelman was also stumped by the mystery. Typically as inflation improves, so does the American mood. But for the first time in decades, that didn’t happen. In a poll commissioned by The Atlantic, Edelman set out to figure out what factor the models weren’t accounting for. What explains the pessimistic lag? Is it related to the pandemic? Media coverage? An overall sense of doom? The answer he found was much simpler.

Listen to the conversation here:

The following is a transcript of the episode:

Hanna Rosin: Happy New Year, everyone. This is Radio Atlantic. I’m Hanna Rosin. So, I’m always interested when people fall under collective delusion, like people who say crime in cities is out of control, that they’re way less safe than they used to be, when literally any statistic will show you that crime in most cities has been on a steady decline since the ’70s.

Well, we are under another collective delusion now. I’m talking about the bad-vibes economy, sometimes known on TikTok as the Silent Depression.

It is a genuine and genuinely unprecedented mystery. Because the economy, by many standard measures, is good. But according to poll after poll, including a poll done by The Atlantic, most Americans are feeling pessimistic about the economy.

Is the economy good, and we irrational beings are the problem? Or is the economy actually bad in some ways that we’re not seeing and not measuring, and we should just trust our feelings? That’s the mystery. And to help us understand it, we have Atlantic senior editor Gilad Edelman, who focuses on economics coverage. Hi, Gilad.

Gilad Edelman: Hello.

Rosin: Okay, Gilad. There is this persistent perception-reality gap in the economy now. Can you just lay it out?

Edelman: So until the last few years, Americans’ perceptions of the economy basically tracked what was going on in the economy, according to key measurements. So, the economy would do better; people’s subjective experience of the economy would go up. The economy would do worse; people would tell you it’s doing worse.

Now, something seems to have changed starting with the pandemic where when the pandemic hits, the economy tanks. People lose their jobs. You know, productivity grinds to a halt. The numbers collapse, and public sentiment, as you’d expect, collapses as well.

So far, that’s all normal. But the strange thing is that as the economy recovers since 2020, consumer sentiment stays low. So that relationship kind of broke apart starting in 2020.

Rosin: And that’s the first time.

Edelman: That’s the first time, according to the data that seems to be available going back to the ’70s and ’80s.

Rosin: And what makes you and experts say the economy is good? What is a good economy?

Edelman: The reason that any economist will tell you that the economy is good is that the top-line numbers that we usually look at to assess the economy have gotten really strong. Unemployment is really low, labor-force participation has increased, which means even people who maybe weren’t looking for jobs now are working because the employment environment has gotten so good, GDP growth is up, and even that big scary thing, inflation, has been going down steadily.

So, inflation finally has come down to at or near the Fed’s 2 percent target rate. So if you look at these numbers that are the typical benchmarks of the economy, any economist would be like, Yeah, these are great.

Rosin: I think what’s important about that is that these are things we would feel—we, the Americans in our day-to-day life, would feel that you had a job, would feel that your wages were up, I don’t know that you would feel GDP, but a lot of these are things that, you know, you would know day to day.

Edelman: And the news is arguably even better than that, because the people who have seen the biggest gains, especially income and wage gains, are people at the lower end of the income distribution, which reverses the trend of widening inequality that we’ve had for decades.

Rosin: So what you’re saying is a wider swath of people across American classes in their day-to-day life are experiencing positive economic benefits.

Edelman: Yeah.

Rosin: So it’s a lot of good news.

Edelman: It’s a lot of good news.

Rosin: And yet it doesn’t land as good news.

Edelman: And yet.

Rosin: Yeah. Okay. So that’s the mystery.

Edelman: And we should—sorry—we should say that, obviously, not everyone is thriving, and much remains unequal and kind of bad, depending on who you’re talking about. But that was always true, and what’s really remarkable about the past few years is that there have been these strong gains for people who we’re used to seeing being left behind in the economy.

Rosin: I see. But, why does it matter if Americans do or don’t feel a certain way about something that is concretely good?

Edelman: Well, I mean, I think there’s a philosophical answer to that and a political one.

The philosophical one is of course it matters if we’re not—like, the economy isn’t our telos as a species, right? Like, the reason that we want the economy to be good is for human thriving on some level. So if humans don’t feel like they’re thriving, then something is not working.

And the more pragmatic reason that this matters is that it seems to have a pretty big bearing on what’s going to happen in November, especially because Joe Biden’s poll numbers and approval rating have been consistently low, and people seem to be blaming him for a quote-unquote “bad economy.” So, the mismatch is definitely important if what you care about is electoral politics.

Rosin: Yeah. Okay. The political stuff is obvious. The philosophical stuff is more complicated.

Edelman: That’s what you bring me in for.

Rosin: Yeah, no, for the complicated stuff. (Laughs.)

All right. So, when people say they’re unhappy, what specifically are they saying? Because now it’s time to actually dig in.

Edelman: Most of the polls that were out there didn’t really get that granular.

Rosin: Mm-hmm.

Edelman: So we commissioned our own.

Rosin: You commissioned a poll asking what?

Edelman: So the idea here was to basically ask people, Why do you think the economy is good or bad?

Rosin: Like, When you say “bad,” what do you have in mind?

Edelman: Exactly.

Rosin: Like therapy. Like poll therapy.

Edelman: It’s a little bit like poll therapy. We didn’t list your father and mother as choices, though. So, that was maybe bad.

Rosin: (Laughs.) Right.

Edelman: Bad psychological practice.

Rosin: But it’s word association? Like, “Bad.” What do you have in mind?

Edelman: That was part of it. We also ask questions that were looking to see if there are any correlations. Like, you know, you ask about people’s income, or their age, where they live.

Rosin: How they vote, probably.

Edelman: How they vote. We asked about, Do you rent versus own? Because we were looking to see if there are any patterns that emerge that tell us about something that’s going on.

Rosin: Interesting. Did you have a theory? Did you have a hypothesis going in of what you thought was going to be the main reason?

Edelman: I did have a hypothesis, because as we were saying, this cleavage between the economy and people’s perceptions really opened up in 2020. So I was looking for, okay, what’s the thing that changed in 2020?

Obviously, we had a pandemic, but that feels like the question. It’s not the answer. What about the pandemic made this change? And one economic data point that has really behaved distinctively in that time period is the cost of housing. So rent and home prices have gone up way more than overall inflation.

And I’m obviously sensitive to this as someone in my mid-30s who rents and, you know, has anxiety about being able to afford a home in an expensive city. So my hypothesis was that the cost of housing would be the big culprit for why people’s opinions aren’t matching up with the economic data.

Rosin: Interesting. I think mine would have been inflation, only because I feel like inflation is something people can’t control—in the same way that people think airplanes are more dangerous than cars, but airplanes are not more dangerous than cars—because you have an illusion of control over whether you can get a job or can’t get a job.

But there’s this grand, out-of-control force out there called inflation that we read about all the time, and I can’t do anything about it, and it’s stealing my money away.

Edelman: Well, you’re much smarter than I am and much closer to what actually happened. The reason that I was reaching for a cuter explanation or something narrower than just inflation is that, remember that inflation is actually one of those economic data points that has historically tracked consumer sentiment.

And again, we’ve seen that relationship break down. And so I was looking for something that wasn’t inflation, because inflation is inside the model.

Rosin: Got it. Got it. Got it. Got it. Got it. Something that the model wasn’t predicting or wasn’t accounting that was such a strong pull that it was distorting the typical model.

Edelman: Yeah, like we needed a new variable that wasn’t in there.

Rosin: Yeah. Or a new variable that wasn’t focused on enough. Okay. Before we get to the answer, what are some of the other options? Because I imagine your options reflected interesting theories out there that you were testing.

Edelman: Yeah, other options, I mean, could be gas prices, although the price of gas has been going down for the past six months. So that was maybe not—I bet we would have gotten different answers on that if we’d asked at a different time. We asked some questions to try to get at people’s media diet, because I think there’s also a question of, Is it because we in the media are too doom and gloom? Or is it, you know, those darn TikTok teens are spreading irresponsible memes alleging that the economy is worse than it is?

Also, I was curious about interest rates, because interest rates are supposed to be the cure for inflation, but they also just make certain things more expensive, because if you have to borrow money to buy a car, that car has become a lot more expensive.

So the cure can be experienced as worse than the disease.

Rosin: Right. Before we get into all the details, I’m just assuming that your top-line conclusion—that Americans are more pessimistic than they should be—was the same as everyone else’s?

Edelman: We asked a couple different versions of the question but, for example, when we asked, “Would you say the U.S. economy is doing better, worse, or about the same as a year ago?” only 20 percent of people said better, 36 percent said the same, and 44 percent said worse. And that is pretty striking because inflation has come way down over the past year, and as you hinted earlier, inflation is, you know, really top of mind for a lot of people.

And we got similar breakdowns when we asked about people’s personal finances. Like, people weren’t quite as negative, but still a minority of people said that they’re personally doing better than they were a year ago.

Rosin: I see. People can separate the economy from their personal finances. Like, they could think their own personal finances are fine, but out there, masses of people aren’t doing well. But that’s not what you think.

Edelman: Yeah, and there are other surveys that have found kind of different results from ours. If you ask people, Are your finances good or bad? more people tend to say good than bad, even if they’re negative about the economy. For what it’s worth, we asked people, “Would you say that you and your family are worse financially than you were a year ago or better?” and 19 percent said better, 49 percent said the same, and 32 percent said worse—so pretty much the same breakdown as asking about the economy.

Rosin: Right, so you only have, in both of these questions, a minority of people say they’re doing better, even though it’s probably a majority of people who are doing better.

Edelman: Yeah, and it’s at least way more than 20 percent.

Rosin: Yeah, yeah, yeah. So were you right? What was the answer? Was it housing?

Edelman: No. No. No, no, no. I was wrong. I was wrong and, Hanna Rosin, you were right.

Rosin: I was right?

Edelman: You were right. Put it in your diary: 2024 is off to a great start. The runaway thing was clearly inflation.

What jumped out and what kind of surprised me was that it’s specifically the price of groceries.

Rosin: Groceries? Specifically groceries?

Okay. Like, people said groceries or you gave them the choice of groceries?

Edelman: Yeah, we gave them the choice. So, we did ask an open-ended question, and inflation and generally, like, the cost of goods, including groceries, came up, you know, at the top of the list for the open-ended version, but not as clearly as when we gave people a list and we said, “Based on the following list, what factor or data point is most important to you when deciding how the national economy is doing?”

And we asked something similar for your personal finances. And I was really struck by this: So 29 percent of people picked the price of groceries for your home. That’s more than picked inflation—23 percent of people picked the rate of inflation. And then among those people, when we asked them to pick a second choice, a lot of them picked groceries.

So, clearly the cost of stuff is the issue here, but groceries were by far the biggest subset people chose when asked to get more specific.

Rosin: Interesting. Now, just to be generous towards you: A house is stuff. Why wouldn’t a house fall under that category? Or even a car. A car is stuff. There are a whole bunch of things that are just wildly more expensive than they were. So why doesn’t that work the same way?

Edelman: Right. It’s a great question. And to be clear, some people did pick housing and some people did pick major purchases, such as cars, but it was a low-single-digit percentage of people. So there’s a few differences here.

One thing that I did not think about clearly enough when I was hypothesizing that the issue would be housing costs is that most households in America own their home. Like, two-thirds of American households own their home. And so when housing gets more expensive, those people are getting wealthier. Now, that doesn’t mean they’re all happy, because a lot of people might want to move. Even if they own their home, they might want to buy a different home, and so they might be unhappy about costs.

But a lot of people are actually experiencing an increase in their net worth.

Rosin: Right. So you were seeing it from your own perspective, which is a person who doesn’t have a house and wants to have a house, right?

Edelman: Yeah. And someone who just pays rent, you know?

Rosin: Right.

Edelman: And it’s just a good reminder that very few things in the economy are just good or bad. It really depends on who you’re talking about because, you know, like the cost that you’re paying for something is revenue for someone else. You know, it’s like every time the jobs numbers come out, you can find a story that says, Great news: The jobs numbers are good, and, Bad news: The jobs numbers are good. We might have more inflation.

So everything has the good side and the bad side to it. And with housing, there’s a case to be made that actually the good side outweighs the bad side for the American people. I’m not sure that that is, like, objectively true, but it seems to kind of help explain what we’re seeing in this survey.


Rosin: Okay, after a short break, we’ll find out why groceries specifically have the power to distort our thinking.


Rosin: Okay, Gilad, so groceries? Why were they the answer, specifically?

Edelman: I think there’s a few things going on here.

One is that the inflation of food, specifically, was way higher than overall inflation. So even though most of the experts say that people’s incomes have grown faster than inflation—in other words, like, people are spending more, but they have even more to spend or even more left over—that may not be true if you just look at food. For example, in 2022, grocery prices increased by almost 12 percent, and overall inflation was only 6.5 percent. So food really did [got more expensive]. It’s not people’s imaginations. And most people are buying groceries at least once a week. I buy groceries more than once a week.

And so you’re just confronted with those prices really frequently, unlike with, say, a car. You know, remember when the car market was really out of control? That stunk if you were buying a car, but most people don’t buy a car every year.

Rosin: Right, whereas everyone’s buying eggs all the time, so I have a catalog in my head of how much the eggs cost last week and how much they cost this week. And also, if my wages could cover it, I don’t think it would matter, because my frame of reference is what the eggs cost before.

So I think most people judge their happiness and unhappiness. This is an actual psychological theory called frame of reference. They judge it relatively, not absolutely. So they judged it relative to what it cost before, or it was before, or what they had before and what they have now.

Edelman: Totally. And, unlike with housing, there’s no group of winners from increased—I mean, there’s a really small group of winners from increased food costs, right? Like, everyone involved in food production. But unlike with housing, where a huge percentage of Americans are getting wealthier, very few people are benefiting from the increased cost of groceries.

So we’re much more united in that. Even with cars, like, when used cars went crazy, some people, like me, were selling their used cars. Like, I made money from used cars being more expensive. That’s another way in which groceries are different from those other categories of things.

Rosin: Right. Nobody sells their groceries. (Laughs.) It’s not a thing.

Edelman: (Laughs.) Yeah, not like, Hanna, I got a sweet deal on some Hebrew National weiners if you want to come over.

Rosin: Exactly. There’s no eBay market for groceries.

Edelman: Yeah, but you’re totally right that there’s a psychological aspect here too, where people tend to experience their income as something they earn and the price of things as just something that’s happening to them.

Rosin: Right, right. And is this—do we have another period in American history where grocery prices, for one reason or another, have just rocketed? Like, inflation has really affected them?

Edelman: Yeah, and you have to go back to the end of the 1970s. So I did poke around in the data because this gets back to what I was talking about before, this idea that the numbers should predict people’s attitudes.

Rosin: Mm-hmm.

Edelman: We haven’t seen inflation numbers like this since the late 1970s, particularly with food. So, maybe it’s not such a mystery after all why consumer sentiment has diverged from the economic fundamentals, because the last 40-plus years of data that is informing these models doesn’t have this kind of inflation, so most people alive in America now have no memory of this kind of inflation. So it was a little silly, in hindsight, to think that we could predict how people would react to it.

Rosin: Interesting. So since we’ve been keeping track, we haven’t had a comparable period where inflation has risen so quickly.

Edelman: Exactly.

Rosin: Now, the first presidential primary is this month. How does this bad vibes about the economy play into that?

Edelman: I think there are a couple different ways of looking at it. And anyone who says that they know how this is gonna play out is full of it, because as we’ve seen, things have really changed. We are in uncharted waters.

When it comes to economic sentiment, there’s a few ways of looking at it. One is that—think about inflation.

Rosin: Mm-hmm.

Edelman: The rate of inflation has come way down. That doesn’t mean that prices have come down. So even if inflation hits zero percent, that just means prices have plateaued. So it’s reasonable to expect there to be a lag between inflation getting under control and people feeling like prices are under control.

Rosin: Because practically speaking, we have to forget about the fact that prices were X amount two years ago. We just kind of get used to a new norm. And then two years later, we’ll have totally forgotten about what it was like four years later.

Edelman: Exactly. It’s like, when I gain weight, I get a little upset about it, but that becomes the new normal. And then if I gain more weight, I’m happy if I just get back to the previous gained-weight level of weight.

Rosin: Right. So we just have to wait this out, basically.

Edelman: (Laughs.) Very good.

Rosin: (Laughs.) Okay. I didn’t even mean that. But yeah, okay. We have to wait this out.

Edelman: Yeah, get used to that, using that new belt loop.

I think there’s a very reasonable case to be made that a big issue here is just the lag effect. You know, the last round of numbers had grocery prices actually coming in below the Fed’s overall target rate of inflation.

So those numbers seem to have really gotten under control. And maybe in six months, people will have just gotten used to paying a bit more for stuff at the grocery store, and so they won’t perceive it as really expensive.

There’s, like, partial evidence for this because the consumer-sentiment numbers have been trending upwards over the last six months. They’re not back to where they were before the pandemic, but they have been trickling upwards as inflation has cooled off, as gas prices have come back down.

So now if you look at that, there’s a couple questions. So one is just, if it’s true that people will eventually start to feel better, how long does that take? Does it take six months? Take a year? Take two years? And obviously, the answer to that question could be really consequential politically.

Rosin: Right.

Edelman: But the weird thing is that even as consumer sentiment has been going back up, Joe Biden’s approval numbers have not. They’re actually almost as bad now as they were at any point in his presidency so far.

Rosin: I see. So you could get a swing back. Let’s say this whole economic mystery resolves itself in the next four months. Consumer sentiment rises. Everybody feels about the economy the way the economy actually is. It doesn’t necessarily then affect Joe Biden’s approval.

Edelman: Right. Like, I think the natural assumption is people are upset about the economy. People are negative about Joe Biden. Those things must be causally related. But I think we might be about to find out how true that is, because if those things were really tightly linked, then you would expect that as consumer sentiment has been bouncing back a little bit, that so would Biden’s poll numbers. And so far they have not.

So there’s also a world in which the bad-vibes economy kind of goes away, but the bad political vibes toward Biden don’t go away.

Rosin: Mm-hmm. What about you? You said you shop every day.

Edelman: Mm, I do shop a lot. Thanks for asking. (Laughs.)

Rosin: Yes. And?

Edelman: Well, for me, as I was thinking about this, the grocery item that kind of made it click for me was English muffins.

Rosin: That’s so cute.

Edelman: Thank you. They are kind of a cute food with the nooks, the crannies.

Rosin: The nooks, the crannies, and also timeless.

Edelman: Mm-hmm.

Rosin: I ate them as a kid. I eat them now.

Edelman: Well, perhaps because of that, you may also have noticed that they’ve gotten a lot more expensive. I got into making my egg sandwiches with English muffins, and they were $3.50 or so in 2020 where I was shopping.

Rosin: For a pack of six?

Edelman: Pack of six. Yeah. So we’re talking around $0.60, a little under $0.60 per muffin. And then there was this moment in the pandemic when I went to the nearest grocery store, and they were going for $6.

And I was like, Geez, I’m not buying these. It just seems like too much.

Rosin: A dollar a muffin.

Edelman: A dollar a muffin! What, am I made out of money?

Rosin: Exactly. Yeah.

Edelman: I mean, it sounds insane. And I think this is helpful. Like, I’m not behaving rationally here to balk at paying the extra few bucks per pack of English muffin per week. That doesn’t line up with how I treat money in many other contexts in life where the price increase is less salient.

Rosin: Mm-hmm.

Edelman: But for some reason, seeing a pack of English muffins—now, $6 was an outlier, but when I was working on the story that I wrote about this poll, I did kind of canvas my main grocery stores here in D.C., and English muffins were between $5.29 and $5.59 per pack.

Rosin: And do you think the reason it struck you is a feeling of injustice or being taken advantage of, or just a feeling like all your money’s bleeding away?

Because I think everyone would agree that you’re behaving irrationally, and everyone would completely empathize with that feeling and resist buying the English muffin at the same time.

Edelman: I think it is, in a weird way, a sense of injustice or at least of something being wrong. I think we get used to certain prices for things, and they come to feel normal and, by extension, proper.

And I think what happens when inflation spikes, especially for people like me, who have literally no memory of this, is things suddenly seem wrong. Like, you know, it’s like you’re on a rocket that’s accelerating faster than the human body is designed to do. Like, prices have gone up faster than our psychology can really keep track of.

Rosin: And you don’t want to jump into it. Like, your feeling is like, Oh, I’m going to conserve something. I don’t know what you’re conserving, but you’re going to conserve something.

Edelman: Right. Like some of it, I don’t spend that money. Honestly, what it is is, like, I’m going to wait it out. And that is pretty irrational because, in general, while inflation can come down, prices generally don’t go down.

So prices tend to stop increasing as fast, but prices don’t tend to reverse themselves.

Rosin: Hmm.

Edelman: Having said that, there is a slightly happy ending to my personal tale.

Rosin: Okay.

Edelman: So I wrote this article a couple weeks ago, at the end of December. And at one of my local grocery stores, a pack of English muffins was $5.59. And I went back this weekend, and they were down to $4.49.

Rosin: Oh! So they did go down.

Edelman: They did. And I don’t know if I can take credit for that.

Rosin: You mean, personal credit? Like, you think that they heard your call?

Edelman: I think I may have shamed them.

Rosin: Wow. Okay. (Laughs.)

Edelman: Like I can’t—I mean, I guess, yeah, it seems unknowable, but I choose to believe that I solved inflation for America. (Laughs.)

Rosin: Amazing. So the question is: How does this mystery get solved? And the answer is Gilad. All right.


Rosin: Gilad, thank you for joining us.

Edelman: Thanks for having me.

Rosin: Yeah. Come anytime.


Rosin: This episode of Radio Atlantic was produced by Kevin Townsend. It was engineered by Rob Smierciak. Claudine Ebeid is the executive producer for Atlantic Audio, and Andrea Valdez is our managing editor. I’m Hanna Rosin. Thank you for listening.


Edelman: I hope you’re still recording because this is gold, but I have a somewhat idiosyncratic approach to my egg-and-cheese sandwiches that is gonna sound bad, but you should actually try it.

So the key is that I microwave the egg.

Rosin: Okay, you’re gonna have to go through the whole process. So you’re toasting the muffin.

Edelman: Yeah, exactly. Step one—because as you know, they take a while to toast—step one is tenderly fork open the English muffin. Don’t try to do it with your hands.

Rosin: Nor with a knife.

Edelman: Yeah, a knife, you could probably do it. But a fork is, like, the true implement for this. Then beat an egg or two eggs in a bowl, and microwave that 30 seconds for one egg, a minute for two eggs. Then, after that, put on a slice of cheddar cheese. And then another 30 seconds or so after that, it puffs into a nice patty, and then you can scoop that patty out and put it on your English muffin.

Rosin: The egg in the microwave is the only curious part of that pattern.

And as my son, when he used to write out recipes, would always say, the last step is: enjoy.

Edelman: Definitely. (Laughs.)


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