A new CNN poll shows three-quarters of likely voters feel the US economy is in recession. Probably not, but that’s not the point.
The technical definition of a recession is two consecutive quarters of economic contraction experienced by the US economy in the first half of the year. But this is America, and we do things differently than the rest of the world: economists here accept that the United States is only in recession when an obscure and elitist panel of experts determine that economic activity has been widespread for more than a year and significant decline suffers a few months. It’s hard to argue that this happened, which we’ll explain below. And the US economy recovered relatively well in the third quarter.
Still, the economy feels bad for the majority of Americans ahead of the midterms next week. And for a good reason.
Consumer prices have been running hot for more than a year.
What started with supply chain shortages caused by the global pandemic and exacerbated by Russia’s war in Ukraine has grown into a broader problem, leaving Americans with higher costs for everything from vegetables to vet bills.
The closely watched CPI, which measures inflation based on a basket of commonly purchased goods and services, hit a four-decade high of 9.1% in June. The latest readings show that prices have cooled only slightly to 8.2%. But that’s still the highest reading since the early 1980s, and it’s the first time many younger people have ever experienced inflation.
“Inflation has become like a cancer,” Christopher S. Rupkey, chief economist at FwdBonds, said in response to the September CPI report. “It’s spreading to services, where it’s going to be a lot more persistent, a lot more persistent and a lot harder to get those prices down again.”
The job market is a bright spot in the US economy, with unemployment at its lowest level in half a century. And wages have increased by more than 5% on average.
For workers looking to secure better pay or benefits, it’s a great time to negotiate or try a new job. For hiring managers, it’s a different story.
There are nearly two jobs available for every job seeker — a plus for job seekers but a concern for the Federal Reserve as it drives up inflation as bosses pay higher salaries to compete for talent.
And more good news is expected this week – the US economy is still creating jobs. The October jobs report, to be released Friday morning, is expected to show 200,000 jobs were added over the last month, well above the pre-pandemic average.
Gas prices are notoriously volatile and tend to weigh heavily on voters – although there is very little politicians can do to sway prices at the pump one way or another.
That has made for a moody year as US gas prices rose to a record $5 a gallon average over the summer. Since June, prices have fallen significantly to around $3.78. But that drop may not be enough to earn Democrats goodwill among voters given the increased cost of every other necessity.
Just a week before voters head to the polls, President Joe Biden on Monday tried to channel popular outrage at oil companies whose stunning profits have sparked calls for a windfall tax by some on the left.
“Today, record profits don’t happen because you do something new or innovative. The wins are a godsend of war,” Biden said. “Enough is enough.”
Food prices are hitting Americans hard, rising 11.2% in the year to September. That’s an even harder climb than headline inflation. Restaurant prices are up 8.5% and food prices are up a whopping 13%.
But some supermarket staples have risen even higher over the past year: Eggs are up 30.5%, butter is up 26.2% and flour prices are up 24.2%, according to Bureau of Labor data Statistics. A handful of foods like steaks and tomatoes have seen annual declines.
Several factors have contributed to these higher costs, including the war in Ukraine, droughts and other extreme weather conditions, and a deadly bird flu that impacted poultry supplies.
But that’s all cold consolation for Americans who’ve had to change their diet, switch to private label and cut back to stay on budget. And there may not be much relief for the holidays: A recent report by market research firm IRI estimates that a typical Thanksgiving meal will cost 13.5% more this year than last year.
Buying a home is more affordable than it has been since the mid-1980s.
Mortgage rates on a 30-year fixed-rate loan hit 7% earlier this year and home prices remain just below their recent record highs, leaving many would-be homebuyers out of the market. Rents are cooling off their peak but are still up double-digit percentages year-on-year in many cities.
Inventories remain tight as homeowners who have secured ultra-low interest rates by buying or refinancing over the past two years are reluctant to give up their low monthly payments to move. And that threatens to keep home prices out of reach for many Americans.
Alicia Wallace, Anna Bahney, and Danielle Wiener-Bronner of CNN Business contributed to this report.