In an unprecedented economic recovery, why are we only talking about inflation?

Money by Tracy O. (CC BY-SA 2.0) CC BY-SA 2.0

The economic news is much better than most media coverage would have you believe 

The latest jobs report shows that the U.S. economy continues its rapid recovery from the pandemic crisis. Employers added 428,000 new jobs in April, continuing a now-year-long streak of similarly strong job growth. After surging to a post-World War II high of 14.7% in 2020, unemployment is now down to 3.6%, the lowest level in 50 years.

The employment data mirror other indicators of our strong recovery. Private consumption and business investment have almost completely returned to pre-2020 trends, and household income and wages — even controlling for inflation — are higher now than they were in 2019. Labor force participation, which had fallen from 63.4% to 60.2% in early 2020, has risen again to 62.2%.

The speed and scale of this recovery is without precedent in American history. By comparison, it took 14 years from the onset of the Great Depression for employment to return to 1929 levels. It took over eight years for unemployment to return to its pre-2008 level during the Great Recession, and real income and consumption have never fully recovered from the Global Financial Crisis and the Lost Decade that followed.

The Biden administration’s unprecedentedly aggressive fiscal policy has been central to this extraordinary recovery. The U.S. fiscal response via the American Rescue Plan was larger than that of any other rich democracy, and our recovery has been correspondingly stronger. This is excellent news: policymakers learned the right lessons from the Obama administration’s errors in 2009, when both the size and composition of the American Recovery and Reinvestment Act (ARRA) were completely inadequate to the scale of the damage from the financial crisis.

And yet, news of this unprecedentedly rapid and successful recovery has been drowned out by the drumbeat of media coverage of inflation. A rough metric of this is the massive imbalance between news articles with inflation and unemployment in the headline. Since Joe Biden’s inauguration, this ratio has been 7 to 1, based on available LexisNexis data. In the last month – even as unemployment hit a 50-year low – the ratio has been 24 to 1. Read more