Gloomy Attitudes, Sunny Stats As A Bizarre Year Winds Down
If nothing else, we’ve busted the myth that economic optimism has much to do with economic performance.
This has been another strange year. It’s hard to gauge something as subjective as strangeness from one year to the next, but 2021 might be even more of an outlier than the year which preceded it.
Part of that is the widespread, though seemingly unjustified, sense of economic gloom lately. It’s true that we are facing some economic headwinds, like higher than normal (normal for recent decades, anyway) inflation. Also, many people (albeit far from the majority) are still facing pandemic-related impacts to their livelihoods. Billionaires are probably doing better than they should be (to the tune of now owning 3.5 percent of the world’s household wealth, which doesn’t sound like all that much until you realize there are only around 2,755 of them).
Yet, despite these economic challenges, this economic gloominess seems more like a spillover of the bad feelings permeating other aspects of public life in America than any real reflection of how the U.S. is doing as a whole. We recently got a couple new data points which again show that the nation is set to end the year on fairly solid economic footing.
On December 9, the Federal Reserve released a report showing that U.S. household wealth has reached a record $144.7 trillion as of the end of the third quarter of 2021. A good portion of recent growth in household wealth is attributable to increases in real estate values — not the most immediately useful type of wealth gain for most households, as it can be difficult to extract that value given that most people have to continue living in their homes. Still, the amounts held in household savings accounts and in household checking accounts increased from the second quarter to the third quarter too, indicating that Americans do have some extra cash on hand too.
Even as Americans have more money socked away than ever before, they are not being shy about spending plenty of it either, because corporate profits have also reached a record high. In the third quarter, U.S. corporations achieved record profits in dollar terms — something that happens fairly frequently for a number of reasons, including the aforementioned inflation. But, a bit more unusual was the revelation that corporate profits as a share of gross domestic product also rose to new heights. At 11 percent of GDP, third-quarter corporate profits overtopped the previous record of 10.7 percent, which was set just in the second quarter of 2021. Prior to that, the all-time high for corporate profits as a percentage of GDP was 10.6, and that dated back all the way to 2012.
Americans have more money than ever before, corporations are getting richer than ever before, the U.S. just had its lowest level of weekly unemployment claims since 1969, wages and salaries paid by private businesses rose by 2.4 percent from January to October of this year after inflation while disposable income increased by 3 percent after inflation during the same period, and yet, poll after poll finds that around two-thirds of Americans think the economy is bad and getting worse.
Oddly, even as about two-thirds of Americans are pessimistic about the economy, roughly the same proportion — 65 percent — say their personal financial situation is good. Well, as anyone who’s won this hard-earned knowledge for themselves can attest, you don’t get very far with people by telling them that the way they feel is wrong.
If nothing else, I suppose we’ve busted the myth that economic optimism has much to do with actual economic performance. Whyever Americans have soured on the economy, they’re still sitting on a record cache of wealth. Businesses are still pulling in record profits. 2021 is set to end on good terms economically, and while some aspects of economic growth are slowing, there are no immediately apparent reasons why the overall prosperity can’t just keep going right into 2022. At the end of the day, perhaps actually doing well is better than being aware that you’re doing well.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.
