The numbers show the economy is doing great. Why isn't public perception catching up?

NPR's Scott Simon speaks with Bloomberg economics reporter Amara Omeokwe about the disconnect between economic numbers and consumer sentiment.

Transcript

SCOTT SIMON, HOST:

There's been some great economic numbers in the last two weeks - 254,000 new jobs in September, plus consumer prices only rose 2.4%, the smallest increase in 3 1/2 years. But tell that to many Americans, and they'll say, hold on a minute. Amara Omeokwe reports on the U.S. economy and the Federal Reserve for Bloomberg. She joins us now. Amara, thanks so much for being with us.

AMARA OMEOKWE: Thanks for having me.

SIMON: What's the data say?

OMEOKWE: Well, the data says that overall the economy is in pretty good shape. As you mentioned, we still have a solid pace of job creation, and inflation has come down from those very high levels that we saw earlier in the pandemic recovery. But people kind of have a reference point in their mind of what they think they should be paying for the things that they want and the things that they need, and prices are still very high compared to where they were pre-pandemic, and they're not likely to go back to those pre-pandemic levels. So I think that's part of what drives some of the negative sentiment that we see out there.

SIMON: And you hear from consumers, don't you?

OMEOKWE: I do hear from consumers in my reporting, and that's definitely one thing that they mention. And then the other thing that we often hear is what is happening out there with the cost of borrowing, right? So part of how we've had this slowdown in inflation is what the Federal Reserve did to address inflation. They raised their key interest rates to the highest level in more than two decades to kind of pull demand out of the economy, to cool the economy down. But raising rates to that level also raised borrowing costs for mortgages, credit cards, car loans. And so people are also feeling the effect of that as well.

SIMON: Do we look at the wrong numbers to tell us how the economy is doing, or at least do we look at numbers that economists rely on, but not people who have to pay for groceries?

OMEOKWE: Yeah, I think one big thing that people think about is that reference point, right? So economists pay a lot of attention to inflation, the rate of change in prices. And that has really calmed down from where we were in 2021 and 2022. But if you look at just the absolute price of a lot of things that people need - groceries, things like that - the price is just really high. And I think people also pay attention to their wage gains. And coming out of the pandemic, we had very strong wage growth because, as you may remember, employers were basically fighting one another to find workers. There was this big worker shortage, and so they were offering big pay raises. But as we've gotten farther into the pandemic recovery, those wage gains have started to slow. And we also have seen the labor market overall cool off. And so I think in the consumer sentiment data now, you're starting to see people sort of noticing that, that the labor market isn't as hot as it was earlier in the pandemic recovery, and you see people in the data starting to talk about that.

And so you also saw the Federal Reserve respond to that, right? So they had been holding interest rates at this high level, but they started to also get a little apprehensive about the cooling in the labor market. And so that's why we saw the Fed come out in September and cut rates by a larger-than-usual half-percentage point because once you see the labor market really start to slow down, it can really result in higher levels of unemployment and pain for people throughout the economy.

SIMON: Are there numbers we should be looking at in addition to the ones that we usually cite?

OMEOKWE: Economists, when I'm talking to them in my reporting, often say, you know, watch what people say, but also watch what people do. And when we look at consumer spending numbers, actually, those have held up very well. And so even as we've had the Fed hold interest rates at this high level, even as we've seen the labor market cool down, we haven't seen spending fall off a cliff. So even though the sentiment data isn't that positive, we're still seeing people in their behavior still spend and still send a signal that overall the economy is doing OK. There are signs that among lower-income Americans, there are signs of stress. So we've seen increasing levels of credit card delinquencies, which says that people at the bottom of the income distribution are maybe feeling a little stress that people in the middle and higher levels of income aren't necessarily feeling. So I think that's also important to note, that often economic data is talking about aggregates, right? But when we drill down onto some of those deeper levels, you can see signs of stress for some Americans.

SIMON: Bloomberg's Amara Omeokwe, thanks so much for being with us.

OMEOKWE: Thanks for having me. Transcript provided by NPR, Copyright NPR.