Why data on the economy doesn't match our feelings
marketplace.org
marketplace.org
So unemployment — as we’d like to say it: “functional unemployment” — it’s really in the 20s, which is horrifying. And for people of color, it’s much worse.
Agreed. It's dishonest to take one headline metric (ie. U3 unemployment), redefine it to mean something entirely different (ie. U6 unemployment or whatever), and then conclude things are much worse than initially thought because the redefined metric is much worse than the original
Suppose that there was a "sickness" metric that measured how many people are in hospital. Then someone comes along and claims the country is much sicker than people thought, citing a "functional sickness" metric that measured anyone who called in sick, and that's "horrifying". They'd be laughed out of the room.
This is an unsatisfying explanation. By his own admission these factors has been happening for the past two decades, but the divergence between consumer expectations and "fundamentals" only really happened post pandemic:
The internet gave people hope about the future in 1999 but now with the internet our desires can never match the reality that follows.
Instead people live in either a post-bubble crash that is about to crash further or if things are going well that just means we are in a super bubble that will have a historic crash. Repeat.
> One commonly used (though also criticized) benchmark for housing affordability is that no more than 30% of household income should go toward housing costs. Households that spend more than that are considered “cost burdened” by the U.S. Department of Housing and Urban Development.
> By that standard, 31.3% of American households were cost burdened in 2023, including 27.1% of households with a mortgage and 49.7% of households that rent, according to 1-year estimates from the Census Bureau’s American Community Survey (ACS). (Many more people own than rent: In the second quarter of 2024, 65.6% of occupied housing units were owned while 34.4% were rented, according to the most recent estimates from the Census Bureau’s Current Population Survey/Housing Vacancy Survey.)
Also looking at average price doesn't account for the rising quality of housing. In the 1980s the average home was around 1,700 square feet. Today, it is nearly 2,700.
https://fred.stlouisfed.org/series/MORTGAGE30US
https://www.newser.com/story/225645/average-size-of-us-homes...
If you look at the pricing trend of a single house, it tells quite a story
In my city, A house that would have been 80k in the 80s is listed between 500-600k today, depending on the neighborhood and how updated it is
In the 80s you could get a 15-20 year mortgage at 20%
Now you get a 30 year mortgage at 5%
If your monthly payment today is less than it would be at 20%, it is only because you are expected to be paying for it at least an extra 10 years compared to the past
There is absolutely no question that houses are less affordable today than they used to be
And that's before even thinking about how salaries haven't grown anywhere near as quickly as real estate prices
Why? It's extremely relevant.
> In the 80s you could get a 15-20 year mortgage at 20%
20% was the rate for 30 year mortgage in the 1980s. My source is specifically for 30 year mortgages.
> If your monthly payment today is less than it would be at 20%, it is only because you are expected to be paying for it at least an extra 10 years compared to the past
That's a gross overgeneralization. Interest rates are lower across the board today.
> If your monthly payment today is less than it would be at 20%, it is only because you are expected to be paying for it at least an extra 10 years compared to the past
I never said they weren't but you also haven't provided any evidence that arent.
> And that's before even thinking about how salaries haven't grown anywhere near as quickly as real estate prices
You're literally just repeating your original claim with no new evidence.
The fiscal cycle is a ponzi cycle following a ponzi curve this mirrors many areas including business growth S-curves.
In general that characteristically means benefits start front-loaded, they have a period of diminishment, and then at a point outflows exceed inflows where you have to pay back and keep paying more than you spent. The overall plan being by the third stage, you are dead and don't have to pay it back, or have been bought out and its someone else's problem.
Even with normalization of the price level it doesn't accurately reflect purchasing power well, and so you cannot really measure opportunity cost or make an accurate objective comparison.
This is the nature of fiat money distortions and why Mises was so against Socialism. In his works he defines the Economic Calculation Problem, or the Socialist Calculation Problem whichever you rather prefer. Sustaining chaotic distortions are ECP/SCP.
The nature of fiat/ponzi is that money printing in an economy debases exchange, extracting cost and forcing failures broadly to non-market socialism when that third stage happens.
This is reflected in a lack of employment, and no or gradually fewer businesses entering the market/industry. It acts like a sieve, with the money printer continuing even after no profit can be made (where regular business exits the market). It is a parasite that kills its host every time, but that is a problem for next quarter.
Distortions take many forms and they are chaotic and by that nature they unknowable in detail specifically and unpredictable. Artificial Supply Constraint to raise price level is one such form.
Often there are whipsaw dynamics between opposing constraints, with diminishing returns required to remain stable. A cliffside with drop-offs on either side as you approach, and you can only march forward into the ocean. At first there is a minor safe path, but eventually it converges. Hysteresis can be an impossible to solve problem without being able to change the underlying system.
Price levels being suppressed (such as Gold/Silver/Food). Price discovery being manipulated (dark pool transactions exceeding exchange volume). These are signs of chaotic distortions caused by money printing.
Economic calculation requires price discovery, which requires adversarial decision-making. Cooperative behaviors naturally occur when there are few participants. The distortions injected through the money supply have knowable (in general) dynamics and outcomes.
Its important to remember that Price != Purchasing Power. Wage suppression is also a real thing and its fueled by the same.
> Well, all that is absolutely true, but sadly it’s even worse than that. What it doesn’t account for is people who have a piece of a job — they work an hour or two here and there, but they want a full-time job. It doesn’t account for that.
The BLS does track that as part of the U-6 unemployment rate which is near a 20 year low. The U-6 unemployment rate counts people that work less than 35 hours per week, but want to work more hours, as unemployed.
> ... we do the monthly unemployment rate. It is a crucial piece of data, but the headline one does not account for ...
FRED explains:
> U-3 is the traditionally reported unemployment rate ...
https://fredblog.stlouisfed.org/2015/05/the-many-flavors-of-...
It is a lie by omission.
This interview was about how the data and our feelings about the economy don't match. The crux of their argument is that we're looking at the wrong data and the right data shows the true state of the economy, but the true data exists and doesn't align with our feelings either.