The Only Word Not Used In This Article: Goldilocks -- From The WSJ -- November 1, 2023

Locator: 45892ECONOMY. 

This is an incredibly good article. Greg Ip has it exactly right. But despite all his "research." Greg Ip is/was unable to answer the question, "why are Americans in such a rotten mood?" There are four obvious answers. Actually five. Archived.

Link here.

This is an incredibly long article for The WSJ.  

This is such a great article I may break it up into three or four posts.

The beginning:

Last week we learned that the economy, far from sliding toward recession as economists had predicted over the past year, has actually picked up steam thanks to indefatigable consumers.

Not only has economic output made up all the ground lost during the pandemic, but it is also above where it would have been had the pandemic never happened, judging by what the Congressional Budget Office projected in early 2020.

The same goes for the job market. The unemployment rate at 3.8% is only marginally above where it stood in January 2020. For a while, low unemployment overstated how healthy the job market was because so many people had left the labor force. But except for those over 64, they have mostly returned. The share of the population ages 15 to 64 with jobs topped its prepandemic peak in August.

So if the economy is so good, why are Americans so gloomy? Confidence readings are depressed. Some 69% of respondents to a Wall Street Journal survey in August said the country is headed in the wrong direction. President Biden’s approval ratings are mired around or below 40%, and approval for his handling of the economy is even lower.

The most popular explanation for this dichotomy is that good feelings about jobs are more than offset by high inflation. There is a lot of evidence for this, but it is still not an entirely satisfying answer.

There are two longstanding surveys of consumer confidence. The index produced by the Conference Board, a business research group, incorporates attitudes about the labor market, but not inflation. And this index remains well above its lows around the 2008 and 2001 recessions. No dichotomy there.

By contrast, the University of Michigan sentiment index is at recession-like levels. It appears to be more sensitive to inflation, in part because it asks people if they are financially worse off, and recently 40% of those feeling worse off blame inflation.

But can inflation be the whole story? After all, since peaking at 9.1% in June last year, based on the consumer-price index, inflation has fallen to 3.7%. Some gauges put underlying inflation at around 3%, and the Federal Reserve thinks it is headed gradually to 2%, relieving it of any need to raise interest rates for now. And yet, sentiment is up only moderately since inflation began falling.

And, yes, the next section is on the "misery index." I might post that later.