Inflation Is Getting Better While Voter Concern About Inflation Is Getting Worse

Look I know that in a democracy "the American people" are never supposed to be wrong. But you know what? They're wrong.

Psst. Gas prices peaked in June. So did inflation, by most measures.

People seem to have a hard time figuring out how much to worry about inflation. Should they worry? Yes. Should they think we’re back in 1980? No. Should they base their midterm vote on inflation? Absolutely not.

We have a healthy economy that just added 261,000 jobs in October. Unemployment ticked up slightly, to 3.7 percent. When Ronald Reagan was president the “natural” rate of unemployment was thought to be 7 percent. As recently as 2018 it was thought to be 3.8 percent, which is still higher than what we’ve got now. The unemployment rate will rise higher, but only because the Federal Reserve thinks it’s too low.

The inflation rate is actually falling. It’s been falling since June! Did you know that? Probably not. That’s because economists worry more about “core” inflation, which is inflation minus volatile gas and food prices. That’s risen from 5.9 percent in June to 6.6 percent in September, which is not good. But that’s going by the Consumer Price Index (CPI), which is not the Fed’s preferred metric. The Fed prefers the Personal Consumption Expenditures price index (PCE), where “core” inflation has gone up only 0.1 percent since June. “And anyway,” I write in my latest New Republic piece, “it’s gas and food prices that weigh most heavily on voters’ minds when they worry about inflation.” Gas prices are something else that peaked in June. They’ve mostly been falling ever since.

The proportion of Americans who judge inflation the most important issue in the midterm elections has risen 30 times faster than the CPI, 45 times faster than the “core” CPI, and twice as fast as the PCE (regular index or “core” index). You can read my piece here.