Optimistic Economic Outlet Coupled with Caution

Economic Policy Brief #127 | By: Rosalind Gottfried | November 8, 2021

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Policy Summary

There are positive indications of economic growth in the fourth quarter of the year and, while economists are optimistic, citizens are less so.  The economy grew by .5% in the third quarter, an the fourth quarter is predicted to be strong.  The October jobs report was encouraging.  New jobs reached 531,000 and after adjustments in the August and September figures, the average for the three months was 442,000.  October unemployment was down to 4.6% from 4.8%.   Labor force participation was steady at 61.6%, with the group of 25-54 year olds showing a slight increase.  Total employed persons increased by 4.2 million below pre-pandemic levels while the unemployment rate is 1% above the February 2020 rate.

Persons working from home decreased to 11.6% from 13.2% in September. There seems to be little to no fallout from the end of the Federal Supplemental Unemployment benefits in early September.  This could be a consequence of the increased personal savings resulting from the last stimulus checks and the child tax credit.  Wages, perhaps as a result of labor shortages, increased 4.9% between October 2020 and 2021.  Increases in wages are concentrated at the lowest end of the salary scale. Wages for hourly workers and nonsupervisory staff increased by 5.8% this year.  Thirteen percent of workers have seen no change in their paycheck over the past year and individuals living on fixed incomes, like pensions, have seen no adjustments for inflation.

Evidence that the economy is stagnating, as some feared, is absent. The stock market is strong and the economic recovery does not appear to be as glacial as during the period of the Great Recession.  Still there are fears regarding the supply chain, inflation, labor shortages, and potential pandemic surges.

Policy Analysis

While commonly held measures assessing the economy seem to be holding strong, inflation is rising at the fastest rate since 1991.

Prices of goods are rising, as seen in groceries and used cars, while gas has increased by 74% since May of 2020, though the average is still lower than prices of 2011-14.  People are afraid of inflation and do not trust that economic policy is solid.  Several institutions analyzing economic trends say that although inflation will take into the next year to level out, perhaps significantly into it, the Fed’s inflationary goals will be met once the consumer imbalances level.

A recent Gallup poll showed that 68% of the public believe the economic conditions are worsening.  Experts agree, in general, that even with high inflation there are reasons to be optimistic regarding the economy; inflation should be relatively short lived, the stock market is strong, and wages are on the rise.

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American people,  however, are less sanguine regarding inflation and the economic picture, perhaps because they are daily experiencing the high prices of groceries, gasoline and other staples and increases in pay are not keeping up with their expenditures, particularly if childcare and housing are figured into the equation.

Engagement Resources​

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Optimistic Economic Outlet Coupled with Caution​

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