May 10, 2023
We now have the greatest economy ever. I’m saying that because President Biden won’t, and everyone knows damn well that if Donald Trump was in the White House and we had the same economic situation, he would be boasting about the greatest economy ever all the time. Every Republican politician in the country would be touting the greatest economy ever. And all the political reporters would be writing stories about how the strong economy will make it difficult for the Democrats to beat Trump in the next election.
Incredibly, we are seeing stories about how the economy is a liability for Biden and the Democrats. We don’t know what is in people’s heads and how they think about the economy, but the basic points are very straightforward.
Starting with unemployment, the current unemployment rate of 3.4 percent is the lowest in more than half a century. More than at any time in this period, people who want a job can get one. The unemployment rate for Black workers is at 4.7 percent, the lowest number on record. The unemployment rate for Black teens stands at 12.9 percent, which, unfortunately, is the lowest on record.
We can flip this over and also talk about the good news with people getting jobs. Many people left the labor market during the pandemic, but we are now seeing comparable or higher rates of labor force participation and employment for most demographic groups.
The overall employment-to-population rate (EPOP) for prime-age workers (ages 25 to 54) stood at 80.8 percent in April, 0.2 percentage points above its pre-pandemic peak. For prime-age women, the EPOP stood at 75.1 percent last month. This is not just higher than its pre-pandemic peak, it is the highest EPOP for prime-age women ever.
Not only can people get jobs, but they have had an unprecedented ability to leave jobs they don’t like. The percentage of workers quitting their job in a month increased to 3.0 percent In October of 2021 and again last April. Its prior peak was 2.4 percent. It is now down to 2.5 percent, which is probably a more sustainable rate, but still above the previous peak.
There also was a huge boom in mortgage refinancing since the pandemic. Before interest rates rose last year, more than 20 million people could refinance their mortgages. The average interest saving from refinancing was over $2,000 a year.
We have also seen an explosion in the number of people working from home. Before the pandemic, roughly 5 percent of the workforce worked from home. Now the figure is close to 30 percent. That comes to more than 45 million people. These people are saving themselves thousands of dollars a year in commuting costs and related expenses. In addition, they are saving hundreds of hours a year they would have otherwise spent commuting.
While working from home is a benefit largely restricted to more educated and higher-paid workers, lower-paid workers have also been doing well in the recovery. Research by Arin Dube, David Autor, and Annie McGrew shows that much of the growth in wage inequality over the last four decades has been reversed in the last three years. While there is still far to go, workers in the bottom 20 percent of the wage distribution are seeing their pay grow far more rapidly than those at the middle or top of the wage distribution.
The broader wage picture is more mixed. Workers were hit by the worldwide inflation resulting from the pandemic but are again coming out ahead of inflation. For all workers, the average hourly wage, adjusted for inflation, just reached its pre-pandemic level last month, but over the last six months, it has been growing at a 0.9 percent annual rate. In keeping with the Autor, Dube, and McGrew findings, the average hourly wage for production and non-supervisory workers, a category that excludes roughly 20 percent of mostly higher-paid workers, is 1.3 percent above its pre-pandemic level. It has risen at a 1.9 percent annual rate over the last six months.
We also have seen a large increase in homeownership from the period just before the pandemic. The overall rate of homeownership stood at 66.0 percent in the first quarter of this year, up from 65.1 percent in the fourth quarter of 2019, just before the pandemic. For people under age 35, the increase was 1.6 percentage points, from 37.6 percent to 39.3 percent in the most recent quarter. The homeownership rate for Black households increased by 1.8 percentage points from 44.0 percent to 45.8 percent.
The homeownership rate for Hispanics increased by 1.6 percentage points, from 48.1 percent to 49.7 percent. And, for households with incomes below the median, the homeownership rate increased by 2.0 percentage points, from 51.4 percent to 53.4 percent.
We are also seeing a hugely accelerated transition to clean energy. Electric car sales in the U.S. are up more than 70 percent from their year-ago level. Solar energy installations in 2023 are expected to exceed their previous peak in 2021 by 40 percent. Wind power generation capacity is also increasing rapidly.
These are all really good stories that we can tell about the economy. They are especially impressive given that we have gone through a worldwide pandemic and are seeing the largest war among wealthy countries since World War II.
Does this amount to the greatest economy ever? That’s a tough call. We expect living standards to improve over time as technology improves, people become better educated, and we get a larger and better capital stock.
The real question is the rate of improvement. By that score, it would be hard to beat the decades of the fifties, sixties, and early seventies. We saw a quarter century of generally low unemployment and rapid economic growth, from which the gains were widely shared.
Also, while we have seen some gains for those in the bottom half of the income distribution, we still see falling life expectancies for this group. That is not due to strictly economic factors, but economics plays an important role.
But these realities would not have stopped Donald Trump from proclaiming the “greatest economy ever.” They certainly didn’t before the pandemic. So, grading on a curve, we can declare Biden’s economy the greatest ever.
 Of course, Trump would not be eligible to run for a third term, but again, this is hypothetical.