dr Dre on the radio, The Matrix on the big screen, The Sopranos on TV: 1999 was a wonderful year for many reasons, including economic ones.
That year, median household income rose to a record level, a record that has lasted for nearly two decades. (The average American family was poorer when Donald Trump was running for office than when Bill Clinton left office.) Wages rose across the board — all types of workers received steady pay increases. Productivity growth was strong. Wealth inequality has remained stable and far lower than it is today. The poverty rate has reached its lowest level in years.
I could go on for a long time with the hard statistics: The proportion of workers with a college degree increased. The home ownership rate boomed. The stock market is booming. Consumer confidence was at an all-time high. The proportion of employees was higher than ever before. Investor optimism was higher than ever. The proportion of Americans who say the country is going in the right direction is also at an all-time high.
Things just felt like they were going well and getting better. High quality televisions were ubiquitous; Cell phones are beginning to replace pagers. The proportion of households with a computer and an Internet connection exploded, and the Internet promised to change everything.
Now: catchy TikTok blips on the radio, warmed-up superheroes on the big screen (at least until Barbenheimer), Peak TV drowns us in good content: 2023 is boring for many reasons. About half the country believes we are in or about to enter a recession. Consumer confidence has fallen, as has investor sentiment. Inflation is taking its toll on American families.
But I’m here to tell you this is the best economy ever. Really. This year’s economy has now surpassed that of 1999, the best on record. It is growing fairer than it has been for years. American families are financially more secure and wealthier than ever. It’s going great, I swear.
The labor market is booming, and for once not only for rich people. The unemployment rate is at its lowest level in 60 years – there are more jobs than in a generation. Competition for labor hasn’t just pushed up incomes — the median household income is near its all-time high, which is $6,000 higher than it was in the late 1990s. It has also caused the wages of the lowest paid workers to increase more than those of the highest paid workers. In the last three years, a quarter of the wage inequality that has increased over the past four decades has been eliminated. The real wages of the lowest paid workers are rising faster than since the 1960s. The country’s wage structure is not becoming more unequal, but more equal.
Arindrajit Dube, a labor economist who studies this “unexpected” phenomenon, told me that the country’s “job ladder” collapsed about 20 years ago: workers in bad jobs were stuck in those bad jobs and couldn’t move up. “From around 2018 or 2019 you notice that the tight labor market is bringing some health and dynamism back,” he told me. “People are making more changes. The big resignation, the big reshuffle, whatever you want to call it – it means the market is working better. And it allows people to leave jobs that are really bad.” As a result, workers report that they are happier with their jobs today than at any time since the 1980s, and 4 million more people are in full-time jobs (and 1.6 million fewer people are in part-time jobs) than before the pandemic.
Income improvements and the government’s stimulus payments during the pandemic have helped lift millions of families out of poverty. The child poverty rate has fallen from 12.5 percent to just 5.2 percent in the last three years. This is the lowest value ever measured. The proportion of people living in deep poverty or near-poverty has also declined, and food insecurity is at its lowest level ever.
Bigger paychecks help middle-class families buy homes and build wealth. The homeownership rate was rising faster than ever before interest rates skyrocketed a year ago; Families in the bottom half of the income distribution are more likely to own a home today than at any time since the housing bubble burst in 2006. Most millennials own property; The generation is beginning to catch up with Generation X and the Baby Boomer generation in terms of wealth and household formation.
The economy has also brought extraordinary gains to black Americans. The unemployment rate for black workers is near an all-time low and the unemployment rate gap between white and black workers is narrowing at an all-time high. The wages of black workers are also increasing rapidly.
By all sorts of esoteric standards, American families are doing better than ever. The default rate on loans is at an all-time low. Real disposable income is higher than ever before. The number of personal bankruptcies is at an all-time low.
So we have to ask ourselves: Why don’t we celebrate like we did in 1999?
The most immediate answer is inflation. Not only does it eat away at people’s wages (although income and disposable income are still growing when adjusted for inflation). People just hate doing mental arithmetic every time they fill up their tank or go to the supermarket. And consumers tend not to notice when things are getting better instead of worse: Inflation has cooled significantly, and the prices of eggs, gas, used cars, airline tickets, and dozens of other common consumer goods are falling, but many families have failed to realize this fact.
Then there’s something I like to call the wrong apartment problem. Far too few residential units have been built in the country’s major cities in recent decades; In the meantime, there are also bottlenecks in rural areas. According to one estimate, if supply met demand, about half of Americans would live elsewhere; New York would be eight times the size it is now and San Francisco would be five times the size. Renters are spending a larger portion of their income on housing than they did in 1999, and rents have risen 135 percent while average earnings have risen just 77 percent. The country faces an affordability crisis as health care, childcare and rent eat up large chunks of family budgets.
Nonetheless, these statistics still underscore how dire the situation is. People don’t spend what they can’t afford, and almost nobody can afford what they want anymore. Yes, we have more income, more cash on hand, and better living standards than at any time in our history. But millions of us can’t live in the neighborhoods we want. We’re stuck in too-small, too-distant accommodations, giving up dreams of a second bathroom or a third child. For this reason, nostalgia arouses on social media for the economic conditions of the 1950s, when many Americans still lacked indoor sanitation but could at least live in Brooklyn, Somerville or San Francisco with a decent salary. We’re all stuck in the wrong apartment.
A third key element is inequality. Although lower-income Americans have begun to narrow the gap, it is a very recent phenomenon. And the incomes of the very rich are still growing faster than everyone else. Even as living standards improve, the feeling that gains are not shared equally is detrimental to our communities.
The political and media environment is certainly also a factor. Today’s severe polarization is forcing people to hate business if they hate the president and love business if they love the president, meaning Republicans just aren’t happy right now. “Partisan bias exerts a significant influence on survey measures of economic expectations, and this bias is growing,” says a new study. Turn on the TV and the world is a disaster too: the climate catastrophe, the war in Europe, threats to democracy at home, social media that burns our brains and ruins sex and hanging out, among other pleasures. What can you look forward to again?
Be happy about it: Economically, things are going well for once. They are amazing. You are as good as ever. I promise.
