How is the economy?It depends on your point of view

How do you feel about shopping this month? As the holidays approach, many economists in the United States are asking this question.

The current state of the U.S. economy is a headache. Some data seems exciting.For example, spending on durable goods has risen 1.3% in October, Twice the expected level.Deloitte predicts that total consumer spending will increase It will be as high as 8.1% by 2021, After shrinking in 2020.

To a certain extent, this is a catch-up effect after the pandemic blockade. But consumers have benefited from stimulus checks, a booming stock market, and clearly abundant employment opportunities. In fact, there are currently 1.4 vacancies for every unemployed person in the United States—a record high—and a record high. 4.4 million Americans voluntarily resign In September.Social media is buzzing Quit smoking fever, People shared videos on TikTok and Instagram to celebrate their sense of liberation after resigning.

However, other statistics are far less festive. If jobs look rich, then by historical standards, wage growth is still relatively sluggish. Although American shoppers are spending money, their mood seems particularly gloomy. In November, the Michigan Consumer Confidence Index is a monthly survey that collects consumer expectations about the overall US economy. Operating at 67.4, a 10-year low – Approximately 12.4 percentage points lower than in November 2020 (close to the peak of the pandemic).

This may be attributed to the time lag effect. But the economist Richard Curtin who participated in the survey also accused this fact: Consumers’ wallets are squeezed Through “rapidly escalating inflation plus the lack of a federal policy that effectively corrects the damage caused by inflation to household budgets.”

I suspect there is another psychological problem: one of the reasons inflation has caused such pessimism is that price increases in recent decades have been so unknown that a generation of consumers does not know how to analyze the current prospects. Pessimism reflects disorientation and tangible pain.

To make matters worse, after a year of pandemic lockdown, consumers have seen that many other certainties about the future have also been taken away. This may cause their time frame to shrink. Therefore, even if they are happy to spend money now or give up a job they don’t like, they will be afraid of an uncertain future.

However, this possible psychological explanation is just a hunch: we don’t have much data on how consumers’ time horizons change in a broader sense. This brings us to another important point: economists and policy makers now need to upgrade their systems to track the economy to merge quantitative and qualitative perspectives.

This is not easy. Usually, economists try to predict the future by collecting large amounts of recent past data, looking for correlations, and then calculating forward. Usually it works well. However, if consumer behavior is constantly changing, then the past may not be a good guide to the future; at such a moment, we need a bug-eye view to complement any bird’s-eye view model.

The events that led to the global financial crisis provide an example of why this is important. Before 2008, the financial industry tended to use historical data on consumer defaults to value subprime mortgages. This sounds wise.

However, there is a problem: At the beginning of the 21st century, people’s attitudes towards debt have changed. Most notably, when consumers ran out of money in the late 20th century, they usually defaulted on credit cards first, then car loans and finally mortgages. But at the beginning of the 21st century, a subtle cultural shift took place that caused this sequence to reverse. Consumers who were short of cash were the first to default on housing loans.

It is difficult to see this transition from a distance. It can only be observed up close. Even economists and analysts lack this view.

(A notable exception is the hedge fund trader depicted in the movie Big short According to a true story, he met a pole dancer with a subprime loan in Florida and got some clues. ) As a result, something went wrong with their model-in a way that is hard to see.

Today, other subtle cultural shifts may be underway. Therefore, economists once again urgently need to obtain more different perspectives. Some institutions are trying to do this: For example, the Bank of England is using ethnographic scholars to obtain field evidence about economic conditions.

In addition, some economists are expanding the data sources they use: Harvard University Economics Professor Alberto Cavallo (Alberto Cavallo) recently used online real-time price data to track inflation in a way that is better than official consumers The price index is more timely and accurate.

But more can and should be done. The more information that different data signals seem to send, the more important it becomes to combine these bird’s-eye views with worm eye diagrams. Few financial situations are so fascinating but so difficult to read.

Follow Gillian on Twitter @吉连特 And email her gillian.tett@ft.com

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