Who Knows More About the Economy than the Star of ‘Most Expensivist Shit?’ Paul Krugman Maybe, But Probably No One.
Despite the running dialogue from major news outlets and most politicians, the economy has actually been doing fairly well by most macroeconomic standards over the past few years. Sometimes it’s important to remember that people respond to fear and news stations respond to ratings. In the end, shit could be a lot worse. Like, 2008/2009 worse.
Real GDP Per Capita
Since 2015, real GDP per capita, the most popular metric for individual income among economists has increased from $50,800 to just under $52,000. That’s a big jump for two years. Put it this way: that’s like getting about a two dollar raise every single week for two years. Put even more simply, the U.S. is producing more per person now than it was two years ago. That’s a good thing, especially considering the $3000 drop between 2007 and 2009. GDP per capita is now well above pre-recession levels and, at least by this metric, the economic recovery is in full swing.
It is, however, worth considering one of the common complaints against using GDP per capita as a proxy for income, which is that GDP per capita represents an average. This becomes a problematic metric when your population includes extreme outliers, such as the Warren Buffet types in the American economy. These one-percent outliers tend to drag the overall average up and present an overly-optimistic picture of the economy. This problem will be addressed when Tity Boi tackles real median household income below.
Real Median Household Income
Real median household income is the economic indicator with a frustratingly long name which represents the median of U.S. household income. That is to say, if you put everyone in the U.S. in a line ranked by income, the person in the middle would be the median household income. With a population as large as the U.S. this gives a good estimate of true average income. One serious disadvantage of this metric, however is that it is distinct from the average household size. Say, for instance, that median household income doubles, but the size of the average household also doubles. In this scenario, the household still earns the same amount per person and welfare does not change.
Despite this limitation, median household income is gaining popularity as an income indicator and, when used in conjunction with GDP per capita, your income-analysis bases are mainly covered. Sort of like checking IMDB and Rotten Tomatoes just to be really sure you shouldn’t waste fifteen bucks on the Emoji Movie. Median household income has similarly increased, showing that the growth of GDP per captia is not wholly superfluous.
Unemployment, the economic indicator most immediately intelligible to most people. How many people are jobless? The visceral element of this, which keeps unemployment as a main consideration when discussing the economy, is the anxiety of being jobless, an anxiety matched only by the anxiety of read receipts. People like to work. People don’t like being broke. So people care about having jobs.
Luckily for people, the unemployment rate has plummeted recently. From its recession peak of 10%, we are now sitting at a comfortable 4.5%, close to or below what economists consider “full employment.” Full employment is the point of unemployment at which everyone who wants to work can work and any unemployment exists as a natural part of people moving from job to job. In Utah, the unemployment rate fell as low as 3.1%. All this is great news for workers. Low unemployment rates mean a smaller supply of workers to hire from, which means companies looking to hire must offer higher wages to attract workers. Which, in the end, translates to more money.
So, really, the economy is doing well right now and has improved greatly during the last eight years (one wonders if anything which happened over the last eight years could have contributed. Perhaps a two-term, eight year presidency?). People are making more money any way you slice it and more people are working. Knowing this, the next time CNN, Fox, or any suspicious Cheetos in bad toupees try to tell you the economy is doing poorly or that it needs to be “fixed,” know that they’re trying to boost their ratings by appealing to instinctual fears and anxieties. That of course goes double for the aforementioned Cheeto. The ratings for Celebrity Apprentice: White House Edition have just been tremendous, let me tell you. So forget the negative press covfefe and know that things are not currently as bad as people would have you believe. What we really need to look out for is the burst of the student loan bubble, something likely relevant to anyone reading this and a debt bubble with the potential to send us into a 2008-style recession, if not worse.