11.26.2007

Winter of Our Discontent

From the NY Times' Paul Krugman:

“Americans’ Economic Pessimism Reaches Record High.” That’s the headline on a recent Gallup report, which shows a nation deeply unhappy with the state of the economy. Right now, “27% of Americans rate current economic conditions as either ‘excellent’ or ‘good,’ while 44% say they are ‘only fair’ and 28% say they are poor.” Moreover, “an extraordinary 78% of Americans now say the economy is getting worse, while a scant 13% say it is getting better.”

What’s really remarkable about this dismal outlook is that the economy isn’t (yet?) in recession, and consumers haven’t yet felt the full effects of $98 oil (wait until they see this winter’s heating bills) or the plunging dollar, which will raise the prices of imported goods.

The official unemployment rate is fairly low by historical standards. So why are people so unhappy? The unemployment rate in 1998 was only slightly lower than the rate today. But for working Americans, everything else was different. Wages were rising, yet inflation was low, so the purchasing power of workers’ take-home pay was steadily.

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