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Weekly post: Inflation
What the data tells us about inflation and how it's perceived
Patrick Russo, a data scientist and formerly of the Federal Reserve Bank of New York, is the co-founder & CTO of OpenAxis. As always, each visualization has a backlink to share or remix the chart and explore the dataset with tools for collaboration and crowdsourcing insights.
The majority of Americans believe inflation is the biggest problem facing the country, according to Pew Research, while Gallup also shows inflation concerns sharply rising (pictured below). They are concerned with visibly rising costs of food and energy. So, let’s dig into what the data says about inflation and how partisanship and or the media impacts American perception of the economic landscape.
Inflation, what is it (good for)?
The US economy currently has very low unemployment but high inflation. Low unemployment means that relatively few people who aren’t employed yet are actively looking for work. And high inflation means prices are rising. These two economic measures are typically inversely related to each other.
Following an initial decline during the advent of the pandemic, inflation has been running hot since the start of 2021, with wages keeping pace for the most part. This surge in inflation can be attributed to supply shortages caused by COVID-19 and Russia’s invasion of Ukraine, coupled with strong consumer demand which has been underpinned by job and wage growth, on the backend of the pandemic.
In the first five months of 2022, the rate of inflation kept rising while average hourly earnings growth began to flatten; inflation rising to 8.5% while earnings growth hovered between 6.3% and 6.7% from November 2021 to May 2022. High inflation means higher prices, as less people can buy and save for any given income. But when earnings were rising as well, on average, workers weren’t worse off.
Despite wage growth leveling off below inflation, workers still have higher real hourly earnings relative to January 2020 (just before the pandemic). These real wages have been falling, though, with real average hourly earnings only 1.4% above January 2020 in June 2022, while real earnings were previously up 3.4% on average in 2021 relative to January 2020.
One way to deal with inflation is monetary policy, either by adjusting money supply or interest rates, administered by the Federal Reserve. Inflation of 8.5% is well above the Fed’s 2% target, so Chairman Powell and co. have embarked on an interest rate hiking cycle, the latest increase of 75 basis points being the largest since 1994.
But, with the US’s sharp polarization, discussion of the economy has varied on the right vs on the left.
What the news tells us (and what we tell ourselves based on our politics)
Using data from PeakMetrics we can see that discussion of inflation by outlets/sites/authors of all political orientations has increased. However, the Far Right media and Slightly Right media have increased their coverage of inflation more than the Far Left and Slightly Left, especially since the turn of 2021 when President Biden took office.
We count the number of articles/broadcasts/podcasts produced each month by the Far Left, Slightly Left, Slightly Right and Far Right outlets (as classified by NewsGuard, data from PeakMetrics) and index by that category’s Dec 2020-Feb-2021 average.
At its peak in March 2022, the Far Right was talking about inflation 2.4 times the rate they were Dec 2020-Feb-2021 while the Far Left was talking about inflation 1.5 times the rate they were in Dec 2020-Feb-2021. The period Dec 2020-Feb-2021 was chosen as the base because it’s roughly half before and half after Biden’s inauguration.
To understand if it was just inflation that was focused on by some political leanings more than other topics, we also looked at the term “unemployment.” For Q2 and Q3 of 2021, Far Right and Slightly Right outlets talked about unemployment at a disproportionately high rate relative to their base period compared to Slightly Left and Far Left. In fact, in July 2021 Far Right outlets talked about unemployment almost twice the amount they did Dec 2020-Feb-2021 while the Far Left talked about it at half the rate they did in Dec 2020-Feb-2021.
These differences diminished leading into 2022 with the Far Right talking about unemployment at a disproportionately low rate in April 2022 as the unemployment rate itself fell to 3.6%.
More positive economic terms like “employment,” “jobs,” “raises,” and “wages” were actually talked about disproportionately less frequently by the Far Left in June, July, and August of 2021, but disproportionately more since December 2021. This while all other political orientations talked about it less than they did Dec 2020-Feb-2021.
Despite how critical inflation and unemployment are - we’re experiencing the highest inflation in 40 years and we’re just 10 basis points above the lowest unemployment in 50 years - the manner in which outlets with different political orientations talk about the economy changes over time. The data suggests that outlets aligned with the party in power focus on the positives yet minimize the negatives while those not aligned with the party in power do the opposite. And that in turn shapes the perception of what worries Americans most by party, as seen below.
And the perception of how the economy is doing overall.
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