Americans are ticked off about the economy. Here’s why. - The Boston Globe (2024)

The question wasn’t for President Biden, whose poll numbers show deep dissatisfaction with his handling of the economy. It was for Jerome Powell, chair of the Federal Reserve, posed at a news conference following the central bank’s decision last week to leave interest rates at the highest level in two decades to bring down inflation further.

“I don’t think anyone knows, has a definitive answer why people are not as happy about the economy as they might be,” Powell responded. “All I can tell you is what the data show, which is we’ve got an economy that’s growing at a solid pace, we’ve got a very strong labor market with unemployment at 4 percent.”

The problem

Statistics like gross domestic product and employment don’t capture the complete economic picture. Even as the inflation rate has moderated and stocks trade at record highs, Americans are frustrated.

In 2020, Annie Lowrey, an economics reporter for The Atlantic, penned a piece called “The Great Affordability Crisis Breaking America.” Writing before the pandemic sent inflation sky high, she argued that families during the 2010s were hammered by the mounting costs of housing, health care, child care, and college debt.

“For millions, a roaring economy felt precarious or downright terrible,” she wrote.

On an episode earlier this month of “The Ezra Klein Show,” the eponymous podcast hosted by her husband, Lowrey explained that the inflation outbreak in 2021 and 2022 exploded that long-simmering crisis.

“Inflation is just one statistic,” she said. “I think that you need to look at a more holistic understanding of what people are spending money on, what they’re getting for their money, and the trade offs they’re making to keep themselves in budget.”

My takeaway

The affordability crisis is bigger than inflation. In other words, inflation is slowing but prices remain extraordinarily elevated.

The forces driving the cost of living higher are persistent, political efforts to mitigate them have largely failed, and the Fed lacks the tools — and authority — to tackle them. Partisanship is obviously a factor in perceptions of the economy — 92 percent of Republicans disapproved of Biden’s handling of inflation in a June Economist/YouGov poll versus 27 percent of Democrats. But chalking everything up to politics ignores the real financial stress many people are feeling.

Housing

Costs are through the roof and affordability is in the cellar. The culprit is lack of supply. Lowrey noted that US housing starts are running at about 1.4 million a year, fewer than in 1959, when the US population was about half its current size.

Even if the Fed drives inflation back to its long-term goal of 2 percent — its preferred measure came in at 2.8 percent in April — the housing market remains a mess.

“There will still be a national housing shortage as there was before the pandemic,” Powell said.

Health care

The typical household spent $5,850 on health care in 2022, according to the latest tally by the Bureau of Labor Statistics. That’s an increase of 13 percent since 2019 and represents about 8 percent of median household income.

The Centers for Medicare & Medicaid Services projects that out-of-pocket health care spending will increase by an average of 5.4 percent a year through 2032.

Child care

Affordable child care should cost no more than 7 percent of household income, according to the US Department of Health and Human Services. But a 2024 survey by Care.com, a Waltham company that matches families with providers, found that respondents were spending an average of 24 percent of their income on child care.

Student debt

Outstanding student loan debt was $1.6 trillion in the first three months of the year, an increase of 34 percent over the past decade, Fed data show.

“Prior to the pandemic, the typical payment was $200 to $400 a month, which might not sound like that much, but is a lot,” Lowrey said on the podcast. “Add that to rent, add that to whatever you’re paying out of pocket for health care, add that to child care, if you have children, it really, really adds up.”

Final thought

The Fed’s “dual mandate” is to promote maximum employment and stable prices. It succeeded in restoring the job market to its prepandemic strength, but failed to act quickly enough when inflation surged.

Last week, Powell reiterated that the central bank won’t cut interest rates until it’s confident inflation is moving sustainably back to 2 percent, or layoffs accelerate to the point where the risk of a recession becomes unacceptable.

The consensus on Wall Street is the Fed will whip inflation without a recession.

But we will still be left with a staggeringly high cost of living.

Correction: An earlier version of this story misspelled Annie Lowrey’s last name.

Larry Edelman can be reached at larry.edelman@globe.com.