The Truth About the US Economy!

In markets, contagious exuberance can take hold  from time to time, leading to investment frenzies followed by market crashes. Most people who are  interested in markets and investing find this type of collective delusion fascinating. It doesn’t  just show up in markets however - collective delusions are everywhere around us.

According to  Pew Research, over time more and more Americans believe that crime is a growing problem  – they believe that this is more the case nationally than locally – but statistics show  that crime in the United States (and especially violent crime) has plummeted since the 1990’s. There are all sorts of statistics that show that quality of life has improved massively over  time, but for some reason people don’t want to believe that. Twenty years ago I came across  a book by Stephen Moore and Julien Simon called Its Getting Better all the Time, which examined  the 100 greatest trends of the last hundred years which showed that people were taller, healthier,  poverty rates were lower, household incomes had not only risen, but household sizes had fallen,  meaning that there was more money per family member than there had ever been before.

There were many eye-opening charts in the book which showed that despite all the negative  news that we read - that the overall quality of life was trending upwards globally. The authors  showed that a greater percentage of the global population had access to education, nutrition  and clean water than ever before. Statistics like global child mortality – a statistic that  pulls together many of the improvements we have experienced in terms of medicine, hygiene, access  to food and shelter, safety from wars – and much more had improved massively over time.

In 1800  44% of people died before their fifth birthday and today that number has fallen to 3. 7%. The improvements aren’t all in the distant past either, according to the World  Health Organization, although the global population has grown, the total number  of under-5 deaths worldwide has declined from 12.

8 million in 1990 to 4. 9 million in 2022. When I look in the comments section of my videos, I’m occasionally surprised to see how angry  and negative some people are about the economy, they will say that the dollar is in decline – but  if we look at the dollar index – which compares the US dollar to a basket of Americas trade  partners' currencies, we can see that the dollar is in fact strong - every major currency in the  world has fallen against the dollar this year.

The US Economy has been booming – by almost  every measure - in recent years. Most Americans are doing better than they were a year ago,  unemployment is lower, wages are growing, and inflation is declining. It’s not just the one  percent either, the statistics show that Americans across ages and social classes are doing well. 

In a video earlier this year I mentioned that unemployment was near all-time lows – people wrote  in the comments that this was because so many people had stopped looking for work – but that’s  not true - the labor force participation rate has risen every year for the last three years, on top  of that - there are more jobs available today than there are job seekers. These are tangible economic  improvements that should be cheering people up, but that’s not what’s happening. Surveys show  that Americans are the most pessimistic they have been about the economy in thirty years.

TikTokers (who YouTubers look down on) have coined the term “the silent depression,”  claiming that it’s harder to get by today than it was during the great depression. An  idea that is entirely divorced from reality. During the great Depression US GDP contracted  by 35% international trade more than halved and unemployment rose to 23%.

In contrast, last  week’s GDP report showed that the US economy grew at a 2. 8% annualized rate and unemployment  is at 4. 1% - which is near its all-time lows.

Up until a few years ago Americans economic  attitudes mostly tracked what was actually happening in the economy. When things  improved, surveys showed that people’s subjective experience of the economy improved  too, and when there was a slow down people reported that things had gotten worse for them. Everything seemed to change in mid-2020.

When the pandemic first struck the economy tanked and  sentiment collapsed with it – so far that’s totally normal. But the strange thing is that  when the economy bounced back, sentiment didn’t. The relationship between economic statistics and  surveys of public sentiment broke down entirely at that point – and this was totally new – there  is no history of a similar divergence looking back through economic history.

So, let’s  dig into why people are so gloomy about the economy and so pessimistic about the future  today. Before we get to that let me tell you about this week’s video sponsor – surfshark. I have been using VPN software for quite some time and Surfshark is an easy to use and affordable  VPN app for Windows, Mac, Android, iOS, and more.

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com/boyle. Click the link in the description to sign up today. OK, so what do we mean by a good economy?

Well to start with GDP growth, the US economy  has been outpacing other advanced economies, with some projecting that the US  will grow by as much as 3% this year, when other leading economies are projected to  grow by 1% or less. Next, the stock market has been booming- the S&P is up more than 27% year  to date, there has been strong wage growth low unemployment and declining inflation – which is  getting close to the Fed’s 2% target. Labor force participation has increased which means that  even people who weren’t looking for jobs now are working because the employment environment has  gotten so good.

Even those tiktokers talking about “the silent depression” are earning money  in a way that was not possible during the actual – or noisy depression as I now call it. These are all things that we should feel in our day to day lives – and to top it off,  the people who have seen the biggest income and wage gains are people at the  lower end of the income distribution – as the widening inequality that we have seen  for decades reversed direction during the pandemic in pretty much all advanced economies. A wider swath of people across American classes in their day-to-day life are experiencing positive  economic benefits, but despite all of this, the average man on the street still feels  that the economy is in terrible shape.

Now obviously, I’m not trying to say that everyone  is thriving, and no one has anything to be down about. There are of course plenty of people  experiencing misfortune, but that has always been the case. The thing that is unusual  is just that average sentiment is so bad, when the average American is doing better  economically than they were in the past.

According to Pew Research large majorities  of Americans say they are dissatisfied with the economy and when they look toward  the not-too-distant future, they see a country that will be worse than it is today. When they look to the past, 58% of Americans say that life for people like them is  worse today than it was 50 years ago. Gallup reports that Americans are the most  pessimistic they have been in decades about young people's chances of having greater  material success in life than their parents.

58% of American adults think that it’s unlikely  that today's youth will have a better life than their parents had. This is an 18-percentage-point  increase in pessimism over the last five years. You might think that people are being cautious  and worrying that an economic boom is about to turn to a bust – but if that is true it would  be quite a break with the past too - as the highest percentage of U.

S. adults expecting better  lives for the next generation was 71% in and that happened in1999 – at the peak of the dot com  bubble. So, if people are being cautious now, they certainly weren’t cautious back then.

Gilad Edelman at The Atlantic conducted a poll last December asking over a thousand  Americans how they felt about the economy. Only 20 percent of respondents said that the  economy had improved over the last year and 44 percent said it had gotten worse. He found that while there was a partisan split and Republicans were more negative  about the economy than Democrats, democrats were still very negative, only 33 percent of  Democrats felt that the economy had improved.

Interestingly, Fareed Zacharia reported in the  Washington Post that despite all of the internal pessimism in the United States, international  polls show that the rest of the world views the United States much more positively than they  did five years ago. A survey conducted by King’s College London found that across 24 nations  where trends exist, the share of the public who feel the US model should be followed has  risen by seven percentage points since 2019. Zacharia writes that while Americans may be  troubled by the deep polarization and division in the country, an international audience sees that  the debate – where the nations dirty laundry is constantly washed in full public view is better  than the alternative of repressing national problems – as can happen elsewhere - where a  North Korean style façade of unity is presented.

Gilad Edelman at The Atlantic wrote that he  expected to find that the economic frustration within the United States was driven by housing  inflation and so he gave his survey respondents a long list of factors to choose from as the metric  that was dragging down the national economy. He found that it wasn’t the cost of housing - the  runaway winner (according to his survey) was the price of groceries at the supermarket. He points out that for every person that is irritated that housing prices are rising,  there is another person delighted that the value of their home has gone up.

He learned that people weren’t actually upset that the generous benefits handed out  during the pandemic had been withdrawn – as some people had claimed. Apparently, people  with children at home were more positive on the economy than people without kids - which you  wouldn’t expect if Americans were fuming over the expiration of the expanded child tax credit. I would have expected that some of the pessimism was driven by excessive exposure to social media,  but the survey found that those who reported getting their news from Facebook, Instagram, or  TikTok expressed more positive views than people who didn’t.

Those who read national and financial  newspapers were also more positive than average. The most negative sentiment he found came from  older people, not Gen Z TikTokers. This is quite surprising, as older people are asset owners  and will have benefited from asset inflation.

Edelman points out that grocery prices went  up more than average inflation and that in contrast with housing or used car prices, few  ordinary Americans benefit when grocery prices go up. Higher grocery prices are also  something that Americans see week after week when they go to the stores. Higher used car prices are much less of an irritant as most people can  postpone a car purchase if necessary, and it is a one off event every few years.

Now, most Americans are making more money - after inflation, than they were before the pandemic. I  mentioned that statistic in a video a few months ago – and it drew all sorts of angry comments  with people accusing me of making it up. But it is there in the data – and not just that, wages have  risen the fastest for the lowest-paid workers.

If people were coldly rational, Edelman points out  they would recognize that their higher income more than offsets the higher grocery prices. One reason for the dissatisfaction may be that workers expect their pay to go up over  time, so they think that it’s fair that they are earning more, and unfair that their  grocery bills have gone up at the same time. There is reason to believe that the pandemic and  the associated lockdowns might also have harmed the mood of the country too.

Research from Boston  University found that, prior to the pandemic, 8 percent of American adults experienced  some form of depression. By April 2020, that proportion had jumped to 28 percent  and in 2021, the figure rose to 32 percent. Other reasons for Americas pessimism of late is  the worry that AI will take everyone’s job.

If we listen to Silicon Valley, we are only a year  or two away from a society where filmmakers, journalists, lawyers and Doctors are all put  out of work by AI’s. You’ll be sitting at home penniless worried about what will happen when you  have to explain to the robot plumber who has just unblocked your drain that you can’t afford  to pay him. Will you be able to remove his battery pack before he puts you in cuffs and  carts you away?

How will the Roomba react to seeing you do this – you kinda knew it was  a mistake giving the vacuum cleaner your wifi password… What were you thinking? ? ?

According to YouGov 46% of people who use AI tools at work are worried about AI taking their  job. Among those who never use AI tools at work, 26% are concerned about this. While AI can be  expected to transform many aspects of daily life, there has been a long history of labor  automation, and historically labor demand shifts away from jobs that can be automated  towards new types of work where people work alongside the new technology.

Workers becoming  more productive doesn’t lead to job losses – it leads to more production – which also means  greater availability of goods and services. One of the best examples of jobs being rapidly  automated away is telephone switchboard operators. Around 350,000 women worked for telephone  companies as switchboard operators up until as late as 1950.

An additional million worked  as switchboard operators at offices, hotels, and other businesses. The rate of growth  of telephone networks in the 1920’s led people to project that the phone companies  would soon need to employ every American woman of working age as a switchboard operator. When mechanical switchboards were installed the number of women employed as telephone operators  immediately fell by 50% to 80% - and wages for women in other occupations fell rapidly as  employers were flooded with job applications.

This didn’t last for long, however. Studies show little  or no negative long-term employment effects at all. Laid off switchboard operators quickly found  employment like secretarial work and restaurant jobs and while some of those jobs (like restaurant  work) paid less, others paid the same or more.

Automation typically increases worker productivity  and reduces employment in a given field, but we have seen all sorts of jobs automated in  the past without leading to mass unemployment, the same can be expected in the future. There are all sorts of things we can choose to worry about. The Doomsday Clock is a  symbolic clock that represents how close we are to destroying the world with dangerous  technologies of our own making.

It warns how many metaphorical “minutes to midnight” humanity has  left. It is adjusted every year with the goal of warning the public and inspiring action. I suppose we could lie awake all night worrying about global events that  are entirely outside of our control, or we could focus on taking action to improve  our lives and the lives of those around us.

There are all sorts of positive changes occurring  in the world – despite all of the news we read about hurricanes and natural disasters, the number  of deaths from natural disasters has fallen by 75 percent over the past 100 years. This figure is  even more shocking when you consider how much the global population has grown over that period. Over the last twenty years the proportion of the world’s population living in extreme  poverty has more than halved.

The share of the world population living in democracies  increased continually over the last 250 years, and 80% of the population who live under an  authoritarian regime today — live in one country, China. The world’s population has greater  access to education than ever before too. For those feeling down about the economy,  frustrated about politics, or worried about what the future has in store for us, it is worth  reflecting on the idea that there have been much more difficult periods in the past and that for  most people in the world things have never been better than they are today.

The reason these  statistics have improved is not because people sat at home and worried about the direction  society was taking. They have improved because it’s in everyone’s self-interest to improve  the world, and when things got hard people applied their energy to making things better. Our capacity to reflect on the challenges we face and find solutions explains all of the  scientific and economic progress that has been made over time, and there is no good reason  to believe that will change any time soon.

Economic statistics show that the US economy  is doing just fine right now – and even if it was not – if somehow the numbers are wrong  – there is very little we can do about it individually. If you are feeling pessimistic  – one of the best ways to lift your mood is to go outside and exercise, contribute to  your community, try to learn new things, engage with your friend’s family and loved ones  and work hard on improving your situation, rather than focusing on the things holding you back. If you found todays video interesting you should watch this one next.

Don’t forget  to check out our sponsor Surfshark using the link in the video description. Have a  great day and talk to you again soon, bye.