There is troublingly high inflation. But other indicators paint a much more favorable picture. If inflation can be brought down without a severe recession — which seems like a real possibility — future historians will consider economic policy in the face of the pandemic a remarkable success story.
So how does the current economy compare with the eve of the pandemic?
First, we’ve had a more or less complete recovery in jobs and production. The unemployment rate, at 3.5 percent, is right back where it was before the virus struck. So is the percentage of prime-age adults employed. Gross domestic product is close to what the Congressional Budget Office was projecting prepandemic.
This good news shouldn’t be taken for granted. In the early months of the pandemic, there were many predictions that it would lead to “scarring,” persistent damage to jobs and growth. The sluggish recovery from the 2007-9 recession was still fresh in economists’ memories. So the speed with which we’ve returned to full employment is remarkable, so much so that we might dub it the Great Recovery.
Still, while workers may have jobs again, hasn’t their purchasing power taken a big hit from inflation? The answer may surprise you.
In September, consumer prices were 15 percent higher than they were on the eve of the pandemic. However, average wages were up by 14 percent, almost matching inflation. Wages of nonsupervisory workers, who make up more than 80 percent of the work force, were up 16 percent. So there wasn’t a large hit to real wages overall, although gas and food — which aren’t much affected by policy, but matter a lot to people’s lives — did become less affordable.
More important, some Americans are especially exposed to prices that have gone up a lot. On average, however, there hasn’t been a huge hit to living standards.
But won’t bringing inflation down require an ugly recession? Maybe, and widespread predictions of recession may be taking a toll on public perceptions. But they are predictions, not an established fact — and many economists don’t agree with those predictions.
Manager’s Office Team