Heading into the November presidential election, one of the biggest issues on voters' minds is the economy. According to a new poll, 73% of Americans say strengthening it is their top concern.
Despite a low unemployment rate and slowing inflation, many Americans believe the economy isn’t doing well because food and gas prices are still high.
Well, the government isn’t gonna induce deflation. Wages may rise, and a low unemployment rate contributes to that, so the price may fall relative to your purchasing power, but in absolute terms, the prices are where they are.
“The real wages are increasing much faster than the inflation rate, which is very steady,” said Kishore Kulkarni, an economist with Metropolitan State University in Denver. “And therefore, the real wages are in fact increasing, but people are not feeling it because there is so much negativism outside.”
I don’t know what they’re using, but the CPI – what most people use when referring to “inflation” – incorporates food, and food inflation over the past year is lower than any other component. So they’re not gonna wind up with a lower rate of inflation by excluding food.
12 months is a poor timeframe to use for inflation when the most relevant data to consumers today is 2021-2022, and again fuel is required to function in the US which I don’t see in CPI making it a poor indicator for real finances. Really though my point is metrics can be manipulated to sound good or bad but ignoring consumer sentiment is foolish for a politician seeking to be elected by those consumers.
By that logic we should only read last months data and forget the rest of history, but in reality people have memories and incorporate previous experience in their sentiment.
Those two numbers you are asking about (“true rate” or the abstraction), for the recent past, pretty much work out to the same value.
The CPI excludes some volatile categories, but it’s not a trick, in this case.
The tactic of bringing up that the CPI excludes some categories, and implying that if it did include them, it would show more inflation than what it does (including the pretty significant spike in 2022)… that actually is a trick, actually a pretty subtle and clever one. To make people think the economy is getting worse, when it’s getting better.
Edit: I made a top level comment with the guidebook to some of the other tricks
I didn’t actually know that, thank you. Yeah, I know there is some commonly cited “inflation” number that excludes some volatile categories but over the last couple years that actually doesn’t change the bottom line - but yeah, it makes sense that CPI would include all the common consumer goods regardless of volatility.
Honestly I have to admit I’ve become a little bit jaded with hundreds of times looking some particular claim up and learning about things and finding that someone who was swearing some particular thing, was lying; and I’ve gotten lazy about it as a result
It’s almost as if all the “Biden ruined the economy” trolls are consistently not being 100% truthful and straightforward about things
So I spent some time looking into this wage increase stuff and I did find this fun chart with inflation adjusted wages growing 2% in the last 5 years, that’s pretty paltry compared to the corporate profit increases. I’d bet that power imbalance is a large factor in consumer sentiment falling against otherwise good looking economic data.
We’re in a weird economic time right now where the median is actually misleading.
Wages at the bottom are going up hugely (beating inflation by 12 percentage points). Wages at the middle (median) are pretty much unchanged as you noted. Wages at the top are falling behind inflation. I.e. inequality is going down for the first time in God knows how long.
I talk about it elsewhere in the thread and link to a couple articles, but the short answer is that you’re not wrong but median real wages aren’t the whole picture right now.
And yes corporate profits are a huge problem. There was a huge corporate tax increase in 2023 that funded some of the stuff the led to the 12% wage increase at the bottom end, but it’s nowhere near enough.
Well, the government isn’t gonna induce deflation. Wages may rise, and a low unemployment rate contributes to that, so the price may fall relative to your purchasing power, but in absolute terms, the prices are where they are.
And there you are.
Are they really telling struggling Americans they’re just being “negative” and everything is fine?
As I quoted in my comment, wages are rising faster than inflation, which means that purchasing power is increasing.
If what someone wants is for deflation to be induced and prices to drop in absolute terms, that’s not going to happen; creates a mess of problems.
Which inflation rate are you quoting, the true rate including food and fuel or an abstraction that ignores those inelastic categories?
I don’t know what they’re using, but the CPI – what most people use when referring to “inflation” – incorporates food, and food inflation over the past year is lower than any other component. So they’re not gonna wind up with a lower rate of inflation by excluding food.
12 months is a poor timeframe to use for inflation when the most relevant data to consumers today is 2021-2022, and again fuel is required to function in the US which I don’t see in CPI making it a poor indicator for real finances. Really though my point is metrics can be manipulated to sound good or bad but ignoring consumer sentiment is foolish for a politician seeking to be elected by those consumers.
The most relevant data is the most recent data.
I don’t care about 2022 data, because I’m no longer paid in 2022 dollars or paying 2022 prices.
By that logic we should only read last months data and forget the rest of history, but in reality people have memories and incorporate previous experience in their sentiment.
The most relevant data is the most recent data. You don’t have to “forget the rest is history”, but it is less relevant than the present.
The CPI, which is the inflation measure most commonly used, includes food and fuel.
Those two numbers you are asking about (“true rate” or the abstraction), for the recent past, pretty much work out to the same value.
The CPI excludes some volatile categories, but it’s not a trick, in this case.
The tactic of bringing up that the CPI excludes some categories, and implying that if it did include them, it would show more inflation than what it does (including the pretty significant spike in 2022)… that actually is a trick, actually a pretty subtle and clever one. To make people think the economy is getting worse, when it’s getting better.
Edit: I made a top level comment with the guidebook to some of the other tricks
Anyway, CPI includes both food and fuel.
I didn’t actually know that, thank you. Yeah, I know there is some commonly cited “inflation” number that excludes some volatile categories but over the last couple years that actually doesn’t change the bottom line - but yeah, it makes sense that CPI would include all the common consumer goods regardless of volatility.
“Core inflation”, as the name suggests, excludes some things that are encompassed by CPI. But I think it’s cited much less often than CPI.
Honestly I have to admit I’ve become a little bit jaded with hundreds of times looking some particular claim up and learning about things and finding that someone who was swearing some particular thing, was lying; and I’ve gotten lazy about it as a result
It’s almost as if all the “Biden ruined the economy” trolls are consistently not being 100% truthful and straightforward about things
So I spent some time looking into this wage increase stuff and I did find this fun chart with inflation adjusted wages growing 2% in the last 5 years, that’s pretty paltry compared to the corporate profit increases. I’d bet that power imbalance is a large factor in consumer sentiment falling against otherwise good looking economic data.
We’re in a weird economic time right now where the median is actually misleading.
Wages at the bottom are going up hugely (beating inflation by 12 percentage points). Wages at the middle (median) are pretty much unchanged as you noted. Wages at the top are falling behind inflation. I.e. inequality is going down for the first time in God knows how long.
I talk about it elsewhere in the thread and link to a couple articles, but the short answer is that you’re not wrong but median real wages aren’t the whole picture right now.
And yes corporate profits are a huge problem. There was a huge corporate tax increase in 2023 that funded some of the stuff the led to the 12% wage increase at the bottom end, but it’s nowhere near enough.