If wages aren’t keeping up with prices for most people, they’re going to think it’s a bad economy. They’re going to think it even if the economy and the number of jobs are expanding. That’s my read on the last 30 years or so of data about public opinion and the economy, and it makes intuitive sense. Even when unemployment is high, most people have jobs. When inflation is high, a much larger percentage of voters feels it directly at the grocery store and gas pump.
It’s a point that Paul Krugman does not seem to have fully absorbed. Back in November, he was saying that gloomy media coverage had distracted Americans from the boom we were experiencing. He’s still pointing to public ignorance of job growth as an explanation for its conviction that we’re in a recession. Maybe it’s true that people would be much happier about the economy if only they knew the statistics, as Krugman seems to think. Or maybe they judge the economy based on their direct experiences, and what they know best is a function of what they care most about.