Eugene Ludwig
Appearances
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Anna, it's nice to be with you.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Well, it's really a two-part, Anna. I've either walked by ridden my bicycle by or been in a car passing by the Federal Reserve since I came to town here in Washington over 40 years ago. And the buildings are just as pretty as they were when I arrived. The only thing that's changed is the increasing homeless city of tents, which didn't even exist when I first came.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And there were some people sleeping on grates, maybe, occasionally but now it's a it's like a tent village around the federal reserve so you see that and you say hey what's so good about these numbers tell you everything ought to be better and things aren't better when you when you actually physically see them and touch them
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
The Bureau of Labor Statistics, which comes out with most of these statistics that are used by the Fed and others, is a hardworking bunch of folks that capture data more or less accurately. They do a good job of collecting information. But in creating these headline statistics, They take the raw data and they put it together on the basis of definitions that were locked in in the 1930s.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And they were based on concepts of the 1890s. So that you have definitions that made sense in the 1930s that don't make as much sense today. For example, virtually everybody had a full-time job or no job. Today, there's a lot of part-time. That really influences the data. We found that in all the headline statistic areas.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Well, the economics over a 20-year period obviously themselves fluctuate during that period somewhat. And of course, they vary depending on location in the United States. So there are some areas that have been hit even harder than the median.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
I actually think that the decline has been going on for a longer period of time than 20, 25 years, but the reliable statistics we're able to find were really a 20, 25-year timeframe. And the weakness, as I say, is definitional, but the definitions tend to leave out the fact that middle and low-income Americans have been experiencing a different reality than upper-income Americans.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
If you look at the unemployment statistics that the BLS puts out, what it doesn't do is have any reflection in those numbers really for the degree to which people are working part-time and want to work full-time. and whether or not they can earn a living wage. What we look at is, can people earn above a poverty wage? And if you filter the numbers for
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
I'm working, but I can't earn above a poverty wage. Or I'm working, but I'd love a full-time job, but I can't get it. So you basically create a bucket of what are really functionally unemployed. We call this the unemployed bucket. It's really dreadful. 23% of the American people are functionally unemployed. That is, those that we're told have only a 4-ish percent unemployment rate.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
It's worse for black Americans and worse for women.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
It is fair to say, Ana, that, well, yes, I've got a, as one of my friends in York, Pennsylvania, used to say, a piece of a job. But in terms of what I think people think of as being, oh, they're employed, so they're kind of okay, they're on the ladder upwards, or at least a ladder they can put a roof over your head or have a decent meal, they're not on that ladder.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
I think you explain why the American people have been so upset, that is middle- and low-income Americans, because their reality is, is not good and getting worse.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
The big influencer, I think, of public attitude had to do with the increase in prices so that the real wage they were earning was actually down. The nominal wage may have been up, but the real wage was down. And you say, well, how could that be?
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Because if you look at government statistics and you use the CPI, which is a normal inflator that's used, you'd think wages would be up a little bit over that period of time. In fact, up about 3%.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
But that's not reality because for the lower 60%, in fact, what's happening is that the basket of goods and services they buy that need to survive on food, housing, education, that has inflated more than the CPI. And so, in fact, they're not up 3%. They're down 3%. And that's painful. It's painful for people who barely have enough money to put a roof over their head to begin with.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Right. And you add into that the inflation adjuster, which has been used by the BLS, which is not as meaningful for middle and low income Americans. And you use the real adjuster, which is what are they buying? What do they really need? Which is greater. And they're in really a big hole.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Well, the CPI is a basket of goods and service about 80,000. It's a useful statistic as a general picture of the economy generally, but it is not a meaningful statistic really for middle and low income Americans because most of that 80,000 goods and services are things that don't touch middle and low income Americans at all.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
What they're concerned about are the goods and services that really matter to them. And if you look at that basket of goods and services, it is inflated more than the CPI, and it's inflated so much so that there's a meaningful gap that creates a negative improvement for them. In other words, they're not an improvement. Things are going downhill for middle and low-income Americans economically.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
That was the big story over the last four years. But generally, it's more complex than that because in a sense, all the government stats have misleading implications when we're dealing with middle and low income Americans. GDP, which net net does give us a sense of whether the economy is growing or not,
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Whether wealth is being created or not, we would think, for example, gross domestic product means product being produced domestically. That is production. But in fact, that's not what it means. It means really wealth creation, not whether things are actually being produced here shorthand for more jobs. Worse still, while it gives us a sense that there's an even-handed sharing that's going on,
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
In fact, that's also not what the GDP is when one digs into it. It doesn't necessarily mean that middle and low-income Americans' well-being is growing. It just means the economy's wealth is growing.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
So in terms of how one looks at these headline statistics, if one's not going to dig into the details, one gets, I think, a misleading picture of how well things are developing for middle and low-income Americans.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Well, there are a number of different ways one can make the change. One thing that you could do is basically take the statistics we've come up with and substitute them for the headline statistics. They could become the new headline statistics.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Or, alternatively, they could be published alongside the current headline statistics, which would give policymakers a better picture of what's really happening in the economy.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
The reason we're doing this is we're hopeful that policymakers, this is really a bipartisan effort, left, right, whatever, have an accurate picture of the economy they're dealing with, and therefore will make more informed decisions as to what policies they want to pursue.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Thank you, Anna. It's nice to be with you. And thank you, Anna.