Six years after the beginning of the financial crisis of 2008–2009, the best that can be said about the public mood in the United States is that people are no longer catastrophically pessimistic. Instead, they are deeply pessimistic. That is the read from the Gallup poll released on Tuesday, with economic confidence at a mere -17 (the difference between those saying the economy is improving and those stating it is getting worse). That number is substantially better than it was in 2009, and easily bests the -39 of November 2013. But it remains the case that far more people believe that the economy is getting worse than think that it is getting better.
And yet that sour mood is almost completely contradicted by almost every single economic indicator we have. The trajectory is not that things are getting worse. It is the opposite. Over the past year, the unemployment rate has fallen from 7.3 percent to 6.2 percent. Even the more revealing “U-6” unemployment rate—which adds in all marginally attached and temp workers who want full-time jobs—has dropped from 14.3 percent a year ago to 12.2 percent. Labor force participation remains low (62.9 percent) but only marginally less than it has been for the past two years. GDP growth, after a dismal annual rate of -2.9 percent in the first quarter, accelerated to an annual rate of over 4 percent in the second quarter. Inflation remains under 2 percent. Income, the most consequential number for most people, grew in 46 states in the first quarter, and grew at a faster rate than inflation. It grew as well in the last quarter of 2013. That follows a long period of middle-class stagnation and indeed decline in the years after the financial crisis of 2008–2009.
The picture of a stable, expanding, and just-shy-of-vibrant economy is amplified by what companies said when they reported second-quarter earnings in July and into August. With nearly 90 percent of S&P 500 companies reporting, not only were earnings above admittedly low expectations, but so were revenues. Yes, 73 percent of companies reported better earnings than expected, and yes, earnings grew at an 8.4 percent rate (according to FactSet). But earnings are more easily managed and manipulated than revenue. You can create good earnings optics by laying off workers or cutting production. Revenue, however, is not so easily manufactured, and here companies reported a 4.3 percent revenue growth rate. That means actual people or companies spending actual money on goods and services. And some of the strongest sectors were technology and specialty retail, both of which have a strong consumer component. Some notable large retailers, such as Walmart and Macy’s, noted weakness, and July retail sales as reported by the Commerce Department were flat, but the first seven months of 2014 are still registering 3.7 percent sales growth compared with 2013. And juxtaposed to Walmart were chains such as J.C. Penney that saw 6 percent growth in sales and more than 5 percent in revenue.
So what gives? How can this disconnect between popular sentiment and much of the available data be explained?
In part, the problem lies with economic data that essentially aggregates and averages a wide variety of experiences into a few synthetic numbers. Income growth, unemployment rates, spending, GDP growth—all of these simply add up everything happening within a country’s borders. We arrive at one composite number, with little regard for the wide and often extreme variations that these numbers mask.
There is also the complicated issue of how much income growth goes to a very small percentage of the population. Unquestionably, wages for the many have been stagnant for years, but wage stagnation in the mid-1990s and mid-2000s did not produce such widespread despair. You could argue that the effects of the ’90s stock market bubble and the 2000s housing bubble allowed people to live enough beyond their means that such stagnation was less apparent. Yet the current data on income growth over the past year relative to inflation appears to be widespread—to 46 states—and not attributable just to the sliver of the 1 percent.
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