One of the main themes of 2023 is the disconnect between how the economy is actually doing (okay) versus how people feel the economy is doing (not okay).
The source of the disconnect, almost all of it, is due to how much more expensive everything is. People can’t get over it.
I took my dog to the vet this weekend for a routine visit. She got her allergy shot, they cut her nails, and they did some bloodwork as they do every year. It was $567. I can’t believe it. I don’t know exactly how much this used to cost me, but I do know that vet services are up 28% since the start of the pandemic. I also know that transportation is up 30%, cereal is up 27%, and lodging away from home is up 18%.
I feel the prices all around me. Whether it’s large bills like my five hundred bucks at the vet, or everyday items like a $20 salad, it pisses me off every time. Okay but what about the other side of spending? Yes, the real median wage is higher before the pandemic started, but as an emailer wrote:
“People seem to think they deserve their increases in pay but no one deserves increases in costs.”
People adjust to making more money overnight. But they absolutely cannot wrap their heads around how expensive everything is. It’s the only explanation for why only 14% of voters think that Joe Biden has made them better off.
The economy is doing fine but people across the board think otherwise. This is what happens when you squeeze a decade’s worth of price increases into a two-year period. I don’t know what changes this, but it’s a weird situation that might be here for a long while.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.