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February 23, 2022

Macro view: Americans discontented despite economic boom

Some economists believe that Americans continue to be unhappy despite job growth, higher wages, and record household wealth due to shortages and elevated inflation.

Gregory Daco

Gregory Daco, chief economist at EY-Pantheon and former chief US economist at Oxford Economists, shared an article on Americans discontent despite the economy growing rapidly. Economists stated that 2021 was the best year for US job growth, but it also followed record job losses in 2020 due to the Covid-19 pandemic and lockdowns.

Two reasons have been cited as discomforting for Americans despite a stable economic recovery after the pandemic, a record inflation rate of 7.5% in January 2022 that is eating up the wage gains for many and product shortages that continue to dissatisfy a majority of the population. A recent Gallup poll suggested that consumer confidence is nearly as low as it was during the financial crisis of 2009.

The Ukrainian crisis is expected to impact inflation further, by pushing the oil prices. Additionally, prices in the US are also rising faster than the wages, implying lesser purchasing power for people. Product shortages, on the other hand, reflect the supply chain snarls caused by the Covid-19 pandemic leading to what is being referred as pandemic fatigue among consumers.

A University of Michigan poll further revealed that consumer confidence improved last spring but dived in the summer due to inflation and the emergence of the Delta variant, sending people back into a semi-lockdown phase. Confidence barely started to recover when the Omicron wave hit, leaving people struggling to find jobs.

John Ashcroft

John Ashcroft, a lawyer, lobbyist, and former politician who served as the US attorney general in the George W Bush administration, senator from Missouri, and governor of Missouri, shared an article on the UK reporting its first monthly budget surplus since the beginning of the Covid-19 pandemic, despite rising inflation that pushed up debt interest costs to $8.29bn in January on a national debt pile of $3.13tn.

According to the Office for National Statistics, public sector net borrowing was in surplus of $3.94 in January 2022, the first month in which income beat expenditure since January 2020, prior to the pandemic. Borrowing was also $7.34bn less than in January 2021, when the third lockdown impacted the UK economy.

However, the surplus is expected to be still smaller than that reported in January 2020 before the onset of the Covid-19 pandemic. Economists had also estimated a bigger public finances boost of $4.76bn.

Ed Dolan

Ed Dolan, economists and senior fellow at the Niskanen Center, shared an article on rethinking unemployment benefits under vaccine mandates. Sharing excerpts from the article, Dolan tweeted that allowing Americans who refuse to meet employers’ vaccine mandates to receive unemployment insurance (UI) benefits reflects a reality that often goes unrecognised in policymaking, especially with regards to distinguishing between quitting and firing workers that is not real.

A recent report highlighted that US Republican States like Iowa, Florida, Kansas, and Tennessee have been revising their eligibility criteria to allow people to quit their jobs to avail unemployment benefits rather than obeying their employers’ Covid-19 vaccine mandates. However, experts state that the extension of insurance will affect thousands who quit because their employers are imposing their own mandates without the federal requirement.

As of now, workers who quit but were not laid off are generally not eligible for state unemployment benefits. However, till date, relatively fewer Americans appear to have left their jobs because their employers have introduced vaccine mandates. For instance, only 90 out of 35,000 officers left their jobs after the New York City Police Department imposed the mandate.

Experts believe that opening the benefits eligibility to vaccine-averse workers, however, will not change the supply of labour or the financial health of the state UI funds.

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