Need One Bit Of Good Economic News? How about Four?

Even Fox had to admit, this chart is damn impressive.

For well over a year now, we have heard the constant drumbeat of negativity on the economy. Stubborn inflation would require higher interest rates to tame, which would lead to economic contraction, job losses and, inevitably, a recession. Then something like a big strike might come along and further cripple the economy, perhaps as soon as August 1. The thought that this would then sink Joe Biden’s poll numbers even more and set Trump up for a win in 2024 has left many anxious and fearful.

But so far, July has delivered the very opposite of all of that, and the economic news has the folks on Fox scrambling for talking points. (They apparently have settled on “Barbie is Woke” and “Slavery Had Its Benefits.”)

Let’s walk through four specific pieces of very good economic news. I should say at the outset that this doesn’t mean we are clearly out of the recession woods, or that many Americans (including a good chunk of readers here) aren’t still feeling the damaging effects of high inflation. But looking at the broad picture, things went very well in July and are looking even rosier ahead.

Inflation

Two weeks ago brought the first bit of good news. Inflation (meaning, remember, not how high prices are overall but how fast they are rising generally) hit its lowest point since early 2021, before supply chain disruptions and Russia’s invasion of Ukraine (and not a small amount of corporate price gouging) sent oil and food prices soaring.

The annual rate of inflation fell to 3% in June compared to a year earlier, helped along by falling prices of gas, airfare, used cars and groceries. That included sizable drops in prices for milk and eggs. The inflation rate was down 1% from May and way down from 9.1% at its peak. From May to June of this year, prices only rose 0.2%.

That overall level of 3% gets us near to the Fed’s own target of 2%, which could mean that the successive interest rate hikes are likely to come to end, perhaps pausing after the expected hike this week.

Democrats are making political hay over the fact that the drop coincides with the passage of the Inflation Reduction Act, which no Republicans in the House voted for. Whether or not that bill was a driver of lower inflation is up for debate, but what isn’t in dispute is whether inflation is much lower. It simply is.

As Jordan Weissman of Semafor noted, among the G7 countries, the U.S. has the lowest post-pandemic inflation—and the highest growth.

So let’s talk about that growth!

Economic Growth

How’s this for a headline: “Morgan Stanley credits ‘Bidenomics’ in lifting its U.S. economic-growth outlook.”

And this subheader: “Thanks to infrastructure spending and manufacturing incentives, Morgan Stanley now projects 1.9% GDP growth for the first half of this year, up from 0.5%.”

It’s no wonder the White House has now embraced “Bidenomics” as a campaign term, when it once was used derisively by the right. After all, a major Wall Street bank has now confirmed that the combination of spending from the bipartisan CHIPS and Science Act and the Infrastructure bill—the foundations of Biden’s economic vision for the country—is driving economic growth higher than expected. This offsets the downward pressure that the economy feels from higher interest rates.

That means that the economy is growing and creating jobs, even while inflation is falling. That’s a win-win almost too good to be true. It also means more manufacturing jobs on infrastructure projects—positions that can’t be shipped overseas and don’t require a college degree.

Here’s a little known bonus: Many of the biggest investments resulting from these bills are in swing states like Arizona and Georgia, which have seen a boom in their state economies. As the Washington Post reported,

In Arizona, according to White House figures, private companies have announced about $69 billion in new investments and projects spurred by federal incentives for clean energy production in the Inflation Reduction Act and for the semiconductor industry in the CHIPS Act. Biden’s massive infrastructure bill has directed $3.8 billion in public spending toward the state’s roads, bridges, climate resiliency, and transportation and water systems.

Georgia, meanwhile, has seen announcements of private-sector investments in renewable energy and semiconductor production totaling $33 billion, those figures show. And $5.3 billion in public infrastructure investment has been directed to the state.

The growth in manufacturing spending is particularly notable compared to prior administrations. As Derek Thompson of The Atlantic pointed out, private manufacturing spending hit an all-time high since data first started being collected back in the 1960s.

This growth in private manufacturing and industrial construction spending significantly reduces the chances of a recession as jobs remain plentiful by historic standards, with unemployment at 50 year lows. 

As Biden likes to point out, this is what it feels like to build an economy from the bottom up and middle out, in place of one where wealth is somehow supposed to just trickle down.

Consumer Sentiment

Another really great piece of news landed on Tuesday of this week. The Conference Board’s report on U.S. Consumer Confidence moved sharply higher and now stands at the highest level since July of 2021, the second month of solid gains. The index now reads at 117, up from 110.1 in June. Economists had been expecting a lower reading of 112.

Importantly, the Expectations Index, which measures consumers’ short-term outlook for income, business and labor conditions, moved up as well from 80.0 in June to 88.3 in July. Readings above 80 are good news because numbers below that historically signal a looming recession.

Consumer spending still accounts for 70 percent of the economy, so a healthy and rising consumer confidence index is very good news all around. “The sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets,” according to the report. 

Indeed, wages are now rising faster than inflation, which means consumers overall will have more money in their banks and wallets and will generally feel more secure.

Strike averted, big worker gains secured

To cap off the good news, the Teamsters announced on Tuesday that they had reached agreement with UPS on a new five-year contract covering 340,000 unionized workers, narrowly avoiding a strike that was set to begin August 1. Such a massive work stoppage could have struck a major blow to the economy just as we were looking ahead to clearer skies.

Negotiators called it the “most historic tentative agreement” in company history. It includes $30 billion in wage increases for all workers, more full time positions, and improved workplace protections including adding air conditioning in all new package delivery vehicles.

The victory for the Teamsters is likely to embolden other unions to demand higher wages and better benefits for workers. There are currently 170,000 actors and writers now on strike, FedEx is in talks with its pilots, and the auto unions representing 150,000 workers are negotiating a new contract. Because of a tightening labor market and higher approvals for unions among the electorate, workers may now gain the upper hand in these battles.

And yes, UPS will be fine. As Professor and former Labor Secretary Robert Reich noted, UPS has seen record profits and issued $8.6 billion in stock buybacks and dividends in 2022 while paying its CEO over $19 million. It was high time more of that money went to the workers actually performing the hard work of shipping all those millions of packages.

Now it’s our turn

We still have a long way to go to rebuild our economy into one that benefits everyone, especially those at the bottom and middle. Bidenomics is the first serious attempt to do that since Republicans conned the nation in the 1980s into believing making the rich even richer would be a tide that lifted all ships. 

The evidence that Biden’s approach is working is early, and we need to be cautious not to grow overconfident. But it is fair to say that the resilience of this economy has defied the expectations of nearly every major economist and big bank projection. Recession was once spoken of as a foregone conclusion; now it is only a distinct possibility, with a soft landing looking more likely than before.

Prosperity is often a self-fulfilling aim. The more people believe they can get by or succeed economically, the better they can plan for and invest in their own families’ futures, and the more confidently they can spend. That leads to greater economic activity and more prosperity. That’s why it’s critically important for all of us to highlight and amplify the good economic news, particularly the growing consumer confidence and the success of a growing labor movement. Biden’s economic policies have put us back on the right track, and now it is up to all of us to help see it through.