Are Americans better off than they were four years ago?
As Election Day is here, the data is clear: Americans are better off economically than they were four years ago. I understand many people aren’t feeling it because of the inflation hangover that has left prices noticeably higher than they were in 2020. But it’s important to step back and assess the full picture.
Four years ago, the world was in the mist of the COVID-19 crisis. Unemployment was almost 8% heading into the election, businesses were struggling to survive and one of the top Google search terms was “stimulus check.” Today, unemployment is 4.1%, growth is strong and businesses are investing in new equipment and technology. Under President Joe Biden, the economy has recovered and is now among the strongest in the world.
Growth is so robust right now that the U.S. economy is beating its pre-pandemic trend. No one expected this four years ago. In fact, many experts predicted the economy would be in a recession by now. That didn’t happen. Growth soared to nearly 3% last year and is on track to be similar in 2024. This is well above the typical growth of just under 2 percent.
The job situation is equally impressive. The latest jobs report on Friday was lousy because of strikes and the devastating hurricanes. But more than 16 million jobs have been created under Biden. Yes, roughly half of those were jobs recovered from the pandemic. But the economy today has almost 7 million more jobs than it did in February 2020. All those workers – and their families – are benefiting. I sometimes hear people make erroneous claims that immigrants got all those extra jobs or it’s just people working multiple jobs. The truth is that the share of people working multiple jobs is the same now as it was under President Donald Trump just before the pandemic hit. And the reason “native born” Americans aren’t growing in the labor force is baby boomers are retiring. If you look at native born Americans ages 25 to 54, their labor force participation is higher – by far – than foreign born workers and higher now than at any point under Trump.
Most of this matters little to voters. And I get it. They are focused on high prices. We all lived through the worst inflation in four decades in 2022. It’s been a miracle to see annual inflation decline from 9.1% in the summer of 2022 to 2.4% now. These annual growth rates are how economists and Wall Street traders look at inflation (and helps explain why the stock market recently hit an all-time high). Meanwhile, most voters think about cumulative inflation: Groceries are up 22% in the past four years. Electricity is up 29%. Overall inflation is up 21% since September 2020.
But the question of whether people are better off also takes into account pay increases and wealth. Those gains have been sizable. Hourly wages have risen 22% for rank-and-file workers in the past four years. This means pay has beaten inflation, though only a little. And this is also an average. Not every American is ahead yet. Other income measures look better. After adjusting for inflation and taxes, the income Americans have left to spend is up 6% since the last election.
What really tips the scales to make people better off is the massive increase in wealth for the middle class. The stock market has gained about 75% since Oct. 30, 2020. (A record share of Americans – nearly 60% of households – have money in the market.) And home prices have soared almost 30%. Two-thirds of Americans own their own homes. A house is usually the largest asset that lower- and middle-income households own. All of this helps explain why the bottom 50% of earners have seen their wealth jump 55% in the past four years.
Not everyone has benefited, and the gains are uneven. Renters fear they may never be able to save up enough money now to buy a home. And a rising stock market benefits the richest Americans most of all. But looking at the full picture shows that most Americans are better off financially than they were four years ago.
Historians are likely to give the Biden economy a better grade than voters. But what’s really important is how Biden and the Federal Reserve have proved endless experts wrong and pulled off the deftest macroeconomic maneuver in decades: a true soft landing. They’ve set up the next president for success. The economy has healed. Inflation is back under control. For the past 17 months, wages have grown faster than inflation, and with each passing month, more people tangibly feel that. And most important of all: The economy is experiencing a surge in productivity, meaning workers are able to get a lot more done every hour thanks to technology. That’s the secret sauce that can fuel better days ahead for all Americans for years to come.