Economist Paul Krugman explains why so many Americans are 'very down on' a booming economy

According to the U.S. Bureau of Labor Statistics (BLS), the United States’ unemployment rate fell to 3.9% in December 2021. Ordinarily, low unemployment figures result in high approval ratings for presidents, but President Joe Biden continues to suffer from weak approval ratings — including 33% approval in a Quinnipiac poll released during the first half of January and 43% approval in an Associated Press poll released later in the month. Liberal economist Paul Krugman explains this contradiction in his January 25 column for the New York Times.

In 2022, Krugman writes, there are many reasons to be optimistic about the U.S. economy, from “stellar job growth” to low unemployment. But the perception among many Americans, according to Krugman, is that the economy is doing badly.

“Real wages rose last year,” Krugman explains. “On a two-year basis, they’re probably down, but not by a lot. At the same time, we’ve had stellar job growth — and as I said, the combination of modestly declining real wages with a strong job market has actually been a winner for past presidents. This time, however, consumer sentiment is extremely negative — almost as negative as it was in the late 1970s, when real wages were really plunging and unemployment was rapidly rising.”

Krugman continues, “What’s going on? Surely, it’s the power of narrative. As many of us have noted, Americans are very down on the national economy, but relatively upbeat about their own personal financial situation…. That is, their personal experience is pretty good, but they’ve heard that things are terrible for other people.”

The economist/Times columnist goes on to cite “inflation” and political “partisanship” as two important factors.

“Democrats and Republicans used to have similar assessments of the economy, whoever was president,” Krugman writes. “Now, Republicans assess the economy as worse than it was in June 1980, when inflation was 14% and real wages were falling 6% a year.”

Krugman adds, “Some of it also has to involve the way the media cover the economy…. Somehow, Biden’s inflation, not Biden’s jobs boom, has come to dominate news coverage.”

Krugman wraps up his column by saying that while inflation is a “problem,” it’s important to look at the big picture when analyzing the state of the U.S. economy.

“I’m not arguing that inflation isn’t a problem,” Krugman writes. “Nor am I doing a Phil Gramm and calling America a ‘nation of whiners.’ I am saying that the remarkably negative public reaction to what, by historical standards, would at worst be considered mixed news is an important story in itself and deserves both some coverage and, perhaps, self-reflection on the part of those reporting on the subject.”