The question was not about President Biden, whose poll numbers show deep dissatisfaction with his handling of the economy. It was for Jerome Powell, chairman of the Federal Reserve, held at a press conference after the central bank’s decision last week to leave interest rates at the highest level in two decades to further reduce inflation.
“I don’t think anybody knows, there’s a definitive answer to why people aren’t as happy about the economy as they could be,” Powell replied. “All I can tell you is what the data shows, which is that we have an economy that is growing at a solid pace, we have a very strong job market with unemployment at 4 percent.”
The problem
Statistics such as gross domestic product and employment do not capture the full economic picture. Even though the inflation rate has moderated and stocks are trading at record highs, Americans are frustrated.
In 2020, Annie Lowrey, an economics reporter for The Atlantic, wrote an article called “The Big Affordability Crisis Breaking America.” Writing before the pandemic sent inflation soaring, she argued that households in the 2010s were hit hard by rising costs. of housing, health care, child care and college debt.
“For millions, a roaring economy felt uncertain or downright terrifying,” she wrote.
In an episode earlier this month of “The Ezra Klein Show,” the podcast of the same name hosted by her husband, Lowrey explained that the burst of inflation in 2021 and 2022 sparked that long-simmering crisis.
“Inflation is just a statistic,” she said. “I think you have to look at a more holistic understanding of what people are spending money on, what they’re getting for their money and the trade-offs they’re making to keep themselves on budget.”
My take
The affordability crisis is bigger than inflation. In other words, inflation is slowing, but prices remain extremely high.
The forces driving up the cost of living are persistent, policy efforts to moderate them have largely failed, and the Fed lacks the tools — and authority — to address them.
HOUSING
Costs are through the roof and affordability is in the basement. The culprit is a lack of supply. Lowrey noted that U.S. housing starts are running at about 1.4 million a year, down from 1959, when the U.S. population was about half its current size.
Even if the Fed moves inflation back to its long-term target of 2 percent — its preferred measure came in at 2.8 percent in April — the housing market remains a mess
“There will still be a national housing shortage as there was before the pandemic,” Powell said.
Health care
The typical family spent $5,850 on health care in 2022, according to the latest data from the Bureau of Labor Statistics. This is a 13 percent increase since 2019 and represents about 8 percent of median household income.
The Centers for Medicare & Medicaid Services predicts that out-of-pocket health care spending will increase by an average of 5.4 percent annually through 2032.
Caring for children
Affordable child care should cost no more than 7 percent of a family’s income, according to the U.S. Department of Health and Human Services. But a 2024 survey by Care.com, a Waltham company that matches families with providers, found that respondents spent an average of 24 percent of their income on child care.
student debt
Outstanding student loan debt was $1.6 trillion in the first three months of the year, a 34 percent increase over the past decade, Fed data show.
“Before the pandemic, the typical payment was $200 to $400 a month, which may not sound like a lot, but it’s a lot,” Lowrey said on the podcast. “Add that to rent, add that to anything you pay out of pocket for health care, add that to childcare, if you have kids, that’s really it.
Final thought
The Fed’s “dual mandate” is to promote maximum employment and stable prices. It succeeded in restoring the labor market to its pre-pandemic strength, but failed to act quickly enough when inflation rose.
Last week, Powell reiterated that the central bank will not cut interest rates until it is confident that inflation is returning steadily to 2 percent, or that layoffs will accelerate to the point where the risk of a recession becomes unacceptable.
The consensus on Wall Street is that the Fed will raise inflation without a recession.
But we will be left with an extremely high cost of living.
Correction: An earlier version of this story misspelled Annie Lowrey’s last name.
Larry Edelman can be reached at larry.edelman@globe.com.
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