More Thoughts on America’s Feel-Bad Boom

by Paul Krugman,

By the numbers, 2021 was a boom year for the U.S. economy. Back in 2020 many forecasters expected a sluggish recovery, with unemployment staying high for years. Instead, unemployment has already come down almost to prepandemic levels, and a record percentage of Americans say that this is a good time to find a quality job.

It’s true that inflation has eroded the purchasing power of wages, but new estimates indicate that despite this, real income has gone up for most adults.

Oh, and while the spread of Omicron may cause a bad month or two for jobs, rapidly falling cases in New York and elsewhere suggest that the good economic news will resume soon.

Yet consumer sentiment has plunged: Americans’ assessments of the economy are worse now, on average, than they were in the early months of the pandemic recession. Why?

Poor assessments of the economy, I’d now argue, mainly reflect two things. First is a longstanding issue: People react more negatively to inflation than textbook economics would have predicted. Second is extreme partisanship, fed by right-wing media.

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