By Howard Schneider
WASHINGTON (Reuters) – If the deep divide in U.S. politics makes characterizations of economic data a reliable indicator of party affiliation, the upcoming Republican and Democratic conventions will put this phenomenon on steroids, turn it up to 11 and leave little room for tone. of gray. .
Republicans want things to look bad and fuel feelings against the current Democratic Party.
Democrats want people to forget the hardships that high food and housing costs have caused on their watch and place the shock in the context of rising wages or, on the blame side, corporate profits.
As both parties defend and nominate their candidates for the November 5th presidential vote, here are some things Republicans probably won’t mention at their convention, and some things Democrats would rather people ignore during theirs:
INFLATION IS YESTERDAY’S NEWS
The Federal Reserve won’t say it yet, but the price surge that began in mid-2021 has largely slowed, inflation is approaching the central bank’s 2% target rate, and there are factors that will likely push inflation toward low.
ABOUT THESE CEREAL PRICES
At a July 9 hearing with Fed Chairman Jerome Powell, Republican Senator Steve Daines read his list of complaints about inflation, including that grain prices had risen more than 25% under Biden.
That is true.
He could also have said that they didn’t increase at all last year. Food prices generally followed the same pattern, a punishing level change of about 20% between 2021 and 2023 and little change since then. As with much economic data, it is important when you start the clock and how you decide which is the trend and which is the outlier.
BUYING A USED CAR?
Prices have fallen by around 16% for used vehicles since February 2021, and are falling for new cars as well.
After jammed computer chips and other supply chain problems caused prices of goods to rise from mid-2020 onwards – when COVID lockdowns and fiscal transfers led to overspending on tangible things like services like Dining out and travel were not affordable – prices of goods are now behaving as they did before the pandemic, remaining largely stable or even falling a bit.
PEOPLE PASSED
When asked why people seem so unhappy with the economy, Powell often said that even though price increases were hard to swallow, people were still spending money on travel, concerts and restaurants in a way that seemed inconsistent. with a narrative of families in difficulty.
Data from the Census Bureau’s Household Pulse Survey actually shows an increase in the number of families who say they found it “somewhat” or “very” difficult to make ends meet around the time inflation peaked in 2021. But the national average has since fallen below where it was before inflation rose.
In the Fed’s 2023 Household Economic and Decision-Making Survey, the percentage of those saying they were “at least doing well” remained above 70%, lower than the 78% peak reached in 2021 but about where it was before the pandemic. In contrast, a dismal 22% rated the national economy as “good” or “excellent,” a divide between perceptions of personal and national conditions that has confused many economists.
DEMOCRATS, BEWARE: PRICES DON’T FALL
If the Republican Party is stingy in recognizing any improvement in inflation, Democrats will try to downplay what two years of rapid price increases have meant to people and how long it might be before the memories fade.
Although the prices of individual goods or services may fall, the price level – the more general concept that economists have in mind when they talk about inflation – rarely falls. When price level jumps occur, like the one we just experienced, life becomes more expensive. A cup of coffee will never cost a dime, or even $2, again.
REAL WAGES MAKE
It’s a standard talking point for Democrats that price increases should be viewed in relation to the rapid wage increases seen, especially for lower-paying jobs that have been difficult to fill in the wake of the pandemic.
But the purchasing power of wages has been affected, even if the lingering impact of some pandemic-era transfer programs has masked it.
By the time inflation peaked in the summer of 2022, prices had risen 12% since January 2021, while average hourly wages had risen about 8%.
The disparity has since narrowed, and for workers on production lines or in non-managerial jobs, the purchasing power of the average wage is roughly where it was.
But that equates to years of inactivity, no progress, and hourly wages across the board are still lagging behind.
LOW BLACK UNEMPLOYMENT; LARGE LACK OF WEALTH
The tight labor market resulting from the pandemic helped, as the Biden administration highlights, reduce the unemployment gap between black and white workers and increased the incomes of black families.
But a New York Fed study that looked beyond household income and wealth and adjusted for inflation found that one of the Democratic Party’s key constituencies had actually gone backwards in terms of net worth.
It wasn’t just a matter of not keeping up. Black household wealth was, once adjusted for inflation, actually lower in the third quarter of 2023 than it was in early 2019.
HOUSING WAS AND IS A SHOCK
How the US ended up with a housing shortage is a story that begins at least as far back as the housing market collapse of 2006-2007. Add to this the tightening of zoning laws in many states and cities, people moving homes during the work-from-home days of the pandemic, the impact of high mortgage rates, perhaps even immigration in some markets, and the result is a race. rising rents and prices that may have become a political issue under Democratic watch. The fact that housing inflation has shown a glimmer of easing may not be enough to calm voters as Election Day approaches.
(Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci)
