On the menu today: We’ve reached the point where Biden administration officials, Democrats, and pro-Biden columnists are tearing their hair out, furious that the electorate perceives the economy as being subpar. But if you look in the right places, the economic frustration makes perfect sense — and those right places include grocery prices since before the pandemic, the number of new jobs that are part-time jobs, the current high gas prices and likely summer price hikes, how inflation counteracts the good recent run of the stock market, and how many people owe more in car payments than the worth of their automobiles. Americans measure the economy by a lot more than just the unemployment rate, and no amount of wishing, ranting, or berating is going to get them to change their minds about how they perceive their household finances.
Economic Frustration: Causes and Effects
You don’t have to look far to find columnists who are absolutely befuddled that Americans rate the economy — and President Biden’s economic record — so poorly despite data that, at first glance, suggest the U.S. economy is sitting pretty. Gallup, Pew, CNN, the Washington Post, the New York Times, the Wall Street Journal — they’re all asking variations of the same question: “Why isn’t the growing economy helping public perception of Biden?”
Readers of this newsletter know that part of the answer is that the president is older than dirt and we’ve had a policy of de facto open borders for three years, which shapes voters’ perceptions that Biden is hapless and ineffective. But on the economy, I think it’s obvious that lots of Americans feel like they get bad news every time they go to the grocery store. Or when they see lots of part-time-job opportunities, but fewer options for full-time jobs with benefits. Or when they fill up their gas tank. And maybe even their statements for their 401(k) or retirement accounts don’t seem as bright and cheery after a long bout of runaway inflation.
Economic problem one: Grocery bills.
Earlier this month, the Wall Street Journal looked at how inflation has changed the price of groceries since 2019 — our pre-pandemic sense of “normal” prices for food and household staples.
Stephanie Stamm and Jesse Newman analyzed NielsenIQ data reflecting a selection of commonly purchased items that were valued at a total of $100 in 2019: fruit, vegetables, milk, flour, dish soap, frozen meals, toilet paper. A common dodge of the “inflation isn’t so bad” folks is to contend that those complaining are buying expensive items, but there’s no filet mignon or swordfish here, just the usual items found in just about every refrigerator, cupboard, and pantry in America. Today, that same grocery list costs 36.5 percent more.
The study found that the prices of eggs, chicken, chips, chocolate, soda, sports drinks, and crackers had increased more than 40 percent since 2019. “Shoppers would have to remove almost $37 of items to spend the same amount as in 2019”:
Prices for hundreds of grocery items have increased more than 50 percent since 2019 as food companies raised their prices. Executives have said that higher prices were needed to offset their own rising costs for ingredients, transportation and labor. Some U.S. lawmakers and the Biden administration have criticized food companies for using tactics such as shrinkflation, in which companies shrink their products — but not their prices.
If food and common household items are costing 36 to 50 percent more than they did five years ago, people are going to be angry about the state of the economy. Everybody’s got to eat.
Economists and Democratic officials keep yelling at the electorate, “What are you complaining about? The year-to-year inflation rate is down to just 3.2 percent!” And the electorate is shouting back, “What are you talking about? Everything is still way more expensive than I’m used to paying!”
Unsurprisingly, “Get used to it. This is what you’re going to pay for food from now on,” is not a message that stirs admiration for the incumbent president.
Economic problem two: The U.S. is creating jobs, but a ton of them are part-time jobs.
The first paragraph in CNBC’s write-up of Friday’s jobs report: “Job creation in March easily topped expectations in a sign of continued acceleration for what has been a bustling and resilient labor market.”
I don’t think of CNBC as a particularly egregious cheerleader for the Biden administration, and that is indeed what the topline numbers indicated — nonfarm payrolls increased 303,000 for the month, the unemployment rate ticked down to 3.8 percent, the labor-force-participation rate increased two-tenths of a percentage point. At first glance, the monthly jobs report looked like good news.
But when you read all the way down to the eleventh paragraph, you find: “Gains tilted heavily to part-time workers in the household survey. Full-time workers fell by 6,000, while part-timers increased by 691,000. Multiple job holders rose by 217,000, to 5.2 percent of the total employment level.”
Excuse me? Full-time employment actually went down?
The Heritage Foundation’s E. J. Antoni went over the jobs numbers with a fine-toothed comb and found all kinds of not-so-great news:
It’s a continuation of a long trend: full-time employment is lower today than Feb 2023 with all of the net job creation since then being part-time work. . . . Why the surge in part-time employment? Many Americans have been laid off and replaced one full-time job with two or three part-time ones; people are also picking up additional jobs to make ends meet in a cost-of-living crisis; this has caused an unprecedented divergence between the household and establishment surveys, since the latter double counts individuals with multiple jobs, while the former survey shows a net loss of jobs since Aug 2023.”
As discussed on yesterday’s Three Martini Lunch podcast, it’s easy to envision someone making the same salary, or even a bit more, from two part-time jobs than from one full-time job, but still being upset about their economic situation and the state of the economy.
Antoni continues, with “the shift to so much part-time work, average hours worked per week has trended down for over almost three years and is below the pre-pandemic average; your hourly wage raise doesn’t do much good when it’s combined with a cut in your hours.”
Now, some people love the flexibility of the gig economy. But there are probably a lot of people out there who would prefer one full-time job, working 40 to 50 hours a week, with full benefits including health insurance.
Economic problem three: Gas prices.
On Chris Wallace’s program this weekend, they asked panelists to suggest a news story worth keeping an eye on. I suggested rising gasoline prices as we head into summer.
The national average for all gas grades and formulations in March was $3.54. That’s about the same as it was a year ago, when it was $3.55, and lower than in March 2022, when it was $4.32. But all of those are way higher than the range from from 2016 to 2021, from $2.07 in 2016 to $2.89 in 2021. In other words, most people’s idea of the normal price for a gallon of regular gasoline in early spring is between two and three dollars.
The thing is, demand is lower now, and gets higher in the summer driving season. Prices are supposed to come down in winter when demand is lower, and the national average only went down to $3.19 in January. In my neck of the woods in northern Virginia, we got below three dollars this winter, but just barely, and only for a brief period.
And of course, the price varies a great deal from state to state; in California, the state average is already $5.37, and we’re barely into April. And before the summer driving season, we get into refinery-maintenance season, when producers switch over from the winter blend to the summer blend.
I’m all for “drill, baby, drill,” but if you think more drilling will, by itself, reduce gas prices, then your view is . . . crude, and lacks refinement. (God forgive me, that joke was too tempting.) It doesn’t matter how much more crude oil we get out of the ground if we don’t have the capacity to turn it into a substance that can actually make your car go vroom vroom.
Yes, a few small refineries have come online in recent years, like the Texas International Terminals in Galveston, which can refine about 45,000 barrels per calendar day.
But closures of refineries in 2019 and 2020 reduced U.S. refinery capacity by more than a million barrels per day. There’s a slight bit of good news, as the closure of the 263,776 barrel-per-day LyondellBasell Houston Refinery has been pushed back to 2025. But overall, U.S. refinery capacity’s been flat since Obama’s second term. Gasoline demand isn’t really shrinking much, either, as drivers of gasoline-powered cars rack up nearly 4,500 more miles annually than those with electric vehicles. “Trade groups and other observers have said electric vehicles are typically owned by wealthier families who buy them as a second vehicle.”
Remember, gas prices have a bigger impact on people’s perceptions of the economy because many Americans fill up their tanks regularly and have a pretty good memory of what they paid the last time and what they’re used to paying, and the prices are posted on big signs at every major intersection and highway.
Economic problem four: The stock-market boom is less than meets the eye, thanks to inflation.
At least the Biden administration can point to the booming stock market, right? Eh, maybe not so much, according to Jeff Sommer, writing in the New York Times:
But what most reports and commentary haven’t pointed out is that because inflation has also climbed sharply over the last few years, the value of stock prices has eroded, along with nearly everything else in the economy. When you factor in inflation, the stock market did not actually reach new heights. . . .
We’re certainly close to that inflation-adjusted peak — or may have already reached it — and that’s a big deal. It means that the market is, at last, starting to make real records, pulling stock returns ahead of the eroding effects of inflation.
It’s also a sobering reminder: Despite all the good news in the stock market over the last year or so, once you factor in inflation it really hasn’t gone anywhere since late 2021. Money illusion — the common human failure to pierce the veil imposed by inflation — has obscured that reality.
So yes, the good news is that there’s a chance your retirement account had some nice gains in 2023 and in the first few months of this year. But your expected cost of living in retirement just took a giant leap in the past few years — not just for food and gasoline as outlined above, but likely for housing and other major expenditures.
One last wrinkle: The good news is that car prices are finally coming down a bit. The bad news is that the prices that dealers are willing to pay for trade-ins are plummeting much faster, meaning lots more people owe more on their car than the car is worth.
ADDENDUM: In case you missed it yesterday, I laid out why I don’t think Biden will win any state in 2024 that he didn’t win in 2020.
In 2020, Trump did not win any state that he lost in 2016. In 2012, Barack Obama did not win any state that he did not win in 2008. In 2004, George W. Bush narrowly won the states of Iowa and New Mexico, which he narrowly lost in 2000. In 1996, Bill Clinton won Arizona, Montana, and Florida. (The dynamics were a little different with H. Ross Perot as a major third-party candidate.)
In other words, incumbents running for a second term rarely win states they didn’t win the first time around. That gives Biden a cushion of just 33 electoral votes, because the reallocation of electoral votes after the 2020 census means Biden’s blue states from last cycle have 303 votes, not 306 like last time.