How the ‘strong’ US economy feels for poorer Americans, in five charts

When economic numbers do not tie neatly with narratives on the ground, it is worth looking for three things: I) data flaws II) statistical breakdowns, or III) interacting factors.

FT Alphaville has outlined how all three can help to explain the apparent disconnect between America’s “strong” national economic numbers, and Joe Biden’s poor approval rating. But, puzzlement persists in some corners: when I) and II) are ignored, many reach for III) with sociocultural explanations, from political polarisation to biased news.

Those indeed play a role. But the rising emphasis on the “it's not the economy, stupid” factors is partly because the mainstream is looking at the wrong data. The experience of 330mn Americans cannot be aptly captured by static national-level data, for what is the largest, most complex and most unequal economy in the rich world.

So, rather than focusing on the US as a whole, FTAV dug into the American economy from the perspective of those on the lowest incomes, to help establish some factoids for the ongoing US debate.

Fact 1: Yes, US-wide inflation is gradually easing. But the cheapest US products have seen the fastest increase in price-level; implying lower-income households have faced even higher inflation. (You can find the excellent study by Alberto Cavallo and Oleksiy Kryvstov here.)

Fact 2: Yes, unemployment may still be low, but those on the lowest incomes have grown most worried about losing their job since the start of the year. (Job security concerns tend to hit those on the lowest wages first.)

Fact 3: If one ever needed a reminder that the stock market is a bad indicator for the overall strength of the economy, it is this. The asset-poor see minimal upside to America’s soaring equity, and house, prices.

Fact 4: Yes, the American consumer is buying stuff. But, early delinquencies on credit cards have surpassed pre-pandemic levels for those on the lowest incomes.

Fact 5: To top it off. Americans of all income levels seem to be hearing downbeat news concerning government economic policies.

So, it is probably best to exercise caution when citing US national statistics as evidence of a strong economy, and to avoid reducing the experience of many Americans down to things like the news channels they watch. It is far more complex.