More Americans are finding work than any time during the past 50 years except for just a few.
The 3.6% unemployment rate has been holding steady for three months in a row, according to the Bureau of Labor Statistics’ jobs report released on Friday. With the exception of the last few months of 2019 and the first few months of 2020, it’s a lower unemployment rate than any single month throughout the 1970s, ’80s, ’90s, and 2000s.
That’s usually a positive sign for the economy, especially one that has been ravaged by a global health crisis. From one perspective, jobs are the whole point of the economy: More workers means more productivity and fewer people struggling to pay their bills. President Joe Biden's stimulus package helped supercharge demand that created a jobs boom. There are just two problems: Inflation is also higher than any time since the late ’70s, and Americans don’t seem to care about all the new jobs as much as the high price of stuff.
Since America entered a post-vaccinated world and began reopening in full force last summer, consumer sentiment has been miserable. Despite the economy outperforming expectations in its recovery, consumer confidence was lower than it was during the depths of the pandemic at the end of 2021. Come May, it dropped to a 10-year low.
While the fact that we're still dealing with a pandemic two years later may have something to do with this pessimism, rising prices have been putting Americans in a foul mood. Their wallets are feeling the burn of inflation, and low unemployment just doesn't seem to be moving the needle.
Americans miss their fat wallets
The cost of life's necessities and pleasures have been soaring thanks to a number of reasons, from war to a historic supply shortage. Gas prices hit a record high of $4.67 per gallon on Wednesday. Food prices are climbing at rates Americans haven't seen in decades, with the cost of some items like beef increasing by 16%. And domestic airfare prices for summer vacation are up by 34% compared to summer 2019, per a report by online travel site Hopper.
It's all an effect of that high inflation. Although it moderated in April to an 8.3% year-over-year increase, as measured by the consumer price index (CPI), a slower rate than the prior seven months of consecutive gains, it was still enough to eat away at Americans’ bank accounts.
An analysis by the Washington Post found that it’s hitting lower-income households the hardest because those spend a greater share of their total spending on necessities, some of inflation’s biggest targets. Both Kohl’s and Walmart noted that customers were starting to reel in their spending by shifting to more affordable alternatives or avoiding some purchases altogether. Even higher-income households are cutting back their discretionary spending on things like travel and dining out, per a CNBC survey.
In a speech on Friday following the jobs report, Biden noted the job market is the strongest it's been since World War II but acknowledged that prices at the pump and grocery store are the biggest challenges for working families, promising to bring down the cost of everyday goods.
To be sure, a disconnect between consumer sentiment and consumer behavior persists. While Americans’ shopping binge has curbed since last year’s stimulus, they’re still busy swiping their credit cards. And some economists believe we've reached peak inflation. Robert Triest, a Northeastern University economics professor, recently told Fortune he expects consumer prices to moderate, arguing the Fed’s interest rate increases will help cool the economy through the end of the year.
But talk of the Fed’s efforts to cool inflation have sent recessionary fears swirling.
“If the Fed is too aggressive with its efforts to slow inflation, they might end up hurting the overall economy and the jobs market,” Nancy Davis, the founder of Quadratic Capital Management, told Fortune last month. “It is a fine balance for the Federal Reserve to prioritize its inflation mandate without hurting the economy.”
When it comes to finding work for everyone or keeping costs low, there’s no question about what matters most to Americans.
This story was originally featured on Fortune.com