When will people assume that the economy recovers?

It has been almost four years since Covid-19 hit the world. In the United States, the pandemic killed more than a million people and left several million with lingering health problems. Much of normal life came to a halt, partly because of official lockdowns, but mostly because fear of infection kept people at home. In the following years, the big question was whether the country would fully recover from that crisis. In 2023 we got the answer: yes. In fact, our economy and our society have recovered extraordinarily well. The big question that remains is when, if ever, the public will be ready to accept the good news.

In the short term, of course, the pandemic had serious economic and social repercussions. Employment fell by 25 million in a matter of weeks. Massive public aid reduced economic hardship for families, but maintaining Americans' purchasing power in the face of a disrupted economy meant that demand often outstripped supply, resulting in overstretched supply chains and the outbreak of inflation. At the same time, the pandemic limited social relationships and left many people isolated. The psychological cost is difficult to measure, but the weakening of social ties contributed to a number of negative trends, such as increases in violent crime.

It was easy to imagine that the pandemic experience would leave long-term scars; that persistent Covid and early retirements would leave us with a permanently depleted workforce; that lowering inflation would require years of high unemployment; that the increase in crime heralded a sustained degradation of public order. But none of that happened.

You may have heard about the good economic news. Labor force participation — the share of adults in the current workforce — is actually slightly higher than the Congressional Budget Office projected before the pandemic. Core inflation measures have more or less returned to the Federal Reserve's 2% target, and that's even though unemployment is near its lowest level in 50 years. Adjusted for inflation, most workers' wages have risen.

For some reason I've heard less about the crime news, but it's also extraordinarily good. FBI data shows that violent crime has decreased: it is already back to 2019 levels and appears to continue to decline. Homicides are probably not back to 2019 levels, but they are plummeting. None of this erases the death toll of Covid or the severe learning loss suffered by millions of students. But overall, both our economy and our society are much better off right now than most people would have predicted in the early days of the pandemic, or than most Americans are willing to admit.

Because if the resilience of the United States in the face of the crisis caused by the pandemic has been notable, so has the pessimism of public opinion. By now, anyone writing about the economic situation has become accustomed to receiving emails and social media messages insisting that official statistics on low unemployment and inflation are misleading, if not outright lies. No, the CPI does not ignore food and energy, although some analytical measures do; No, grocery prices are not still sky high.

Rather than engage in further arguments with people desperate to find some justification for negative economic sentiment, I find it more useful to point out that whatever American consumers say about the state of the economy, they spend as if their finances are in good shape. More recently, holiday sales seem to have been quite good. And crime? This is an area where public perceptions have long been very contrary to reality, with people telling interviewers that crime is increasing even though it is rapidly decreasing.

And Americans don't behave as if they're terrified of crime. As I've written before, major urban centers have seen weekend foot traffic—broadly speaking, the number of people visiting the city for fun rather than work—recover to pre-pandemic levels, which It's not what you'd expect if Americans were fleeing violent urban infernos.

So, whatever Americans tell interviewers, they behave as if they lived in a prosperous and fairly safe country (according to historical standards), that is, the country portrayed in official statistics, although not in opinion polls. (Disclaimer: Yes, we have major inequalities and social injustices. But this is no more true now than in previous years, when Americans were much more optimistic.)

The big question, of course, is whether the discouraging stories will prevail over the relatively promising reality in the 2024 elections. Poll data indicate that the good economic news is beginning to sink in, but I do not know if there are similar signs regarding crime. In any case, what they need to know is that the United States has responded extraordinarily well to the economic and social challenges of a deadly pandemic. By most measures, we are a nation on the mend. Let's hope we don't lose our democracy before people realize it.

Paul Krugman is a Nobel Prize winner in Economics

© The New York Times, 2024

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