Karine Jean-Pierre Says the Economy Is Going in the Right Direction — But Why Don’t Americans Feel It In Their Wallets?

White House Press Secretary Karine Jean-Pierre white house march 22 2024_BLU_A93163515

In this election year, inflation is a hot-button issue for both consumers and presidential candidates. The latest consumer price index (CPI) data released April 10 showed that inflation increased even higher than experts had anticipated in March, standing at 3.5% following a 3.2% increase in February. This figure remains higher than the Federal Reserve’s 2% target.

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And the issue is top of mind for voters. According to a recent Data for Progress survey, 27% of voters identified “the economy, jobs, and inflation” as their top priority when deciding their vote — and among these respondents, 51% cited inflation as their primary concern within this category.

Yet, while the administration is saying that the “economy is going in the right direction,” many consumers still feel the pinch in their wallets.

“We’re headed in the right direction as it relates to the economy,” White House press secretary Karine Jean-Pierre recently said on MSNBC‘s “Morning Joe.” “We pay attention to the data that showed consumer confidence was up, right, that showed that 14 million — more than 14 million jobs were created. We saw unemployment at under 4% for 22 months. Those things matter.”

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Why Americans May Not Agree on the Economy

Michael Collins — CFA, founder and CEO of WinCap Financial — explained that there are a few potential reasons why Americans may still be feeling the pinch despite a strong economy.

“One factor could be the lag time between economic growth and its effects on individual households,” said Collins. “While the economy may be improving overall, it can take time for those benefits to trickle down to everyday Americans.”

Collins added that this could be due to a variety of factors such as wage stagnation, rising housing costs and increasing healthcare expenses.

In addition, while inflation has waned compared to a year ago, it does not erase the cumulative impact past inflation caused.

“We have had a 20% increase to overall prices as tracked by CPI data since only 2020,” said Stephen Kates, CFP and principal financial analyst at Launch That. “This is the same amount that we had over the entire 2010s. It is hard for people to shake the stress of rising prices especially when prices were so unusually stable in the decade prior.”

To put this in context, inflation stood at 5% in March 2023 and 8.5% in March 2022 before reaching 9.1% in June 2022, according to Bureau of Labor Statistics (BLS) data.

Stubborn Inflation in a Recovering Economy — ‘A Timing Mismatch’

As Jeffrey A. Rosenkranz, portfolio manager for Shelton Capital Management, noted, after rapid progress in the second half of 2023, inflation is no longer moderating quickly — and in many areas may be re-accelerating.

“Many of the components that consumers see on a daily basis are the ones where progress has been stubborn lately,” he said.

In essence, he argued, this is a timing mismatch — as the economy is recovering, labor markets are tight and wages have been pushed higher over the past few years.

“Americans don’t necessarily think about that every day — whereas every time they fill up at the pump, or buy eggs and milk at the market, or eat a meal out even at a fast-food restaurant, they are reminded of these pockets of inflation that are persistent,” he said.

He added that, ironically, some of the components of inflation people don’t see every day — such as car prices or large durable goods — have moderated in price.

“It’s just that the average American doesn’t see the entire CPI basket every day and tends to have a disproportionate psychological reaction to movement in prices of recurring purchases,” he noted. “Today’s CPI report will do nothing to change this narrative anytime soon.”

Areas Where Consumers Still Feel the Pain of Inflation

In terms of specific areas that may be causing financial strain for consumers, food and gas prices in particular have been steadily increasing in recent months.

“This can be attributed to a variety of factors such as global market fluctuations, weather events impacting crops and production, and political instability in key oil-producing countries,” said WinCap’s Collins.

Shelter costs, including rent and mortgage payments, continue to rise in many parts of the country, making it difficult for individuals and families to find affordable housing.

“This can be especially challenging for those living in high-cost cities or areas with limited housing options,” he said.

Indeed, the index for shelter rose in March, as did the index for gasoline. Combined, these two indexes contributed more than half of the monthly increase in the index for all items, according to the CPI release.

Specifically, the gasoline index increased 1.7% in  March — up 1.3% over the past year. Meanwhile, prices for shelter were up 0.4%, up a whopping 5.7% in the past year.

As for groceries, they continue to be “a weekly shock for much of America,” said Launch That’s Kates.

In March, the food index rose 0.1%, a 2.2% increase over the past year, according to CPI data.

Meanwhile, prices for food at home — your grocery bill — are up 1.2% for the year. And in terms of food away from home — what you pay in restaurants — the index is up 4.2% for the year.

“Add to that the fact that student loans are no longer in forbearance and many younger Americans, especially those with a family, feel the walls closing in on them,” said Kates. He added that the prolific rise in stock and house prices only help those who have substantial assets in stocks and houses, which excludes a lot of young people.

“They are particularly vulnerable to feeling financially overwhelmed in this economy,” he added.

Differences Among Americans Based on Economic Class

Yet, some experts also pointed out that the current economic landscape has different impacts on different people, largely depending on their financial position.

For relatively wealthy individuals — those with high incomes and minimal debt (aside from low-rate mortgages) — the current economy is very good, said Thomas Brock, CFA, CPA, and expert contributor for Annuity.org.

“Persistent inflationary pressure has been less-than-ideal, but quite manageable, given their ample cash flows. Additionally, the high interest rates implemented to combat inflation have been a boon to their income-oriented investment holdings. All the while, a robust stock market has bolstered confidence,” he added.

Meanwhile, for financially disadvantaged individuals, the current economy is difficult to tolerate, providing virtually no opportunity to thrive, he said.

“The surge in inflation, which surfaced in mid-2021 and continues to smolder today, has been crippling. It has busted budgets, diminished liquidity and caused a surge in credit card debt, all of which has been exacerbated by the dramatic rise in interest rates,” he added.

Matt Willer, managing director of capital markets and partner at Phoenix Capital Group Holdings, echoed the above sentiment. He noted that food costs are up considerably, as are energy costs, and “Anyone who carries a credit card balance has a materially higher minimum monthly payment than a few years back.”

“The cost of capital is elevated as it pertains to variable rate loans, or recently originated mortgages,” he said. “The average American isn’t a software engineer for NVIDIA, they are everyday folks that are experiencing a cost of living increase that far outpaces the rate of wage gains.”

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