Is This Economy as Awful as Voters Think? We Ask Our Expert.

Episode Overview

• Host Natalie Kitroeff and Chief Economics Correspondent Ben Casselman (both of The New York Times, which promotes a 1-month free trial of its app at 29:59) analyze the final major snapshot of U.S. economic data before the midterm elections—including retail sales, unemployment claims, industrial production, and inflation.
• The episode investigates the stark disconnect between President Donald Trump’s claims that the U.S. is experiencing "the single greatest moment in the history of our country in terms of the economy" and deep voter frustration over everyday affordability.
• Casselman breaks down affordability across three metrics—inflation, interest rates, and wages—showing how tariffs and the war with Iran have pushed inflation back up to 3.7% while real wage growth has stalled at 0% since Trump returned to office.
• The discussion explores counterintuitive economic strengths—such as a record 5-year streak of unemployment at or below 4.5%, booming AI business investment, and a 6% jump in retail sales—while explaining the hidden caveats that prevent everyday workers from feeling prosperous.
• The episode concludes with an examination of the generational wealth divide, the $1 trillion annual interest burden on the national debt, and a brief news roundup covering $100 million in new midterm spending by Trump, an $80 million donation to Democrats by Michael Bloomberg, and British fighter jets deploying to help Saudi Arabia defend against Houthi attacks as the siege of Taiz, Yemen enters its 3rd week.

Key Concepts

• The Three Pillars of the Affordability Crisis: While the broader economy has real sources of strength, affordability is the primary issue driving voter dissatisfaction and is measured through inflation, borrowing costs, and wages. Although Consumer Price Index inflation fell from a 40-year high of 9% in 2022 to around 3% when Trump took office, progress toward the normal 2% target stalled due to tariffs (taxes on imported goods) and reversed after the U.S. went to war with Iran. The war shut down the Strait of Hormuz, spiking global oil prices, driving gas to $4.00 to $4.50 a gallon, pushing home heating oil up 74% from a year ago, raising airfares, and setting record diesel prices that filter through trucking and agriculture—ultimately pushing September inflation to 3.7%.
• Monetary Policy Reversal and Housing Lock-Out: Because inflation re-accelerated, the Federal Reserve stopped cutting interest rates and, in September, raised rates for the first time in 3 years. Consequently, 30-year fixed-rate mortgages—which were below 3% during the pandemic, spiked to 6% and 7%, and briefly began turning around early this year—have now climbed to roughly 7.5%, pricing many prospective buyers out of the housing market.
• The "Scissors Effect" on Real Wages: A critical driver of voter anger is the simultaneous divergence of wage growth and inflation. Over the past year, wage growth slowed from around 4% down to 3% at the exact moment inflation moved in the opposite direction, from roughly 3% up to 3.7%. Because inflation is outpacing pay raises, the real value of paychecks is shrinking, and by some measures, inflation-adjusted wages have grown 0% since President Trump returned to office.
• The "Low-Hire, Low-Fire" Labor Market Trap: In September, the unemployment rate was 4.2%, marking 5 straight years at or under 4.5%—an all-time historical streak surpassing the 1960s. However, Casselman rejects the common cliché that it is a "good time to have a job, bad time to look for one." Because the labor market has low turnover and low hiring, currently employed workers cannot easily switch jobs or leverage outside offers to negotiate bigger raises or advance their careers, leaving them feeling stagnant despite high job security.
• Nuanced Strengths and the AI Vulnerability: Corporate profits, new business formation, and business investments are strong, pushing the stock market to record highs. However, a massive share of this business spending is concentrated in artificial intelligence (building data centers and power plants). While Casselman notes that no one is yet predicting the AI bubble is bursting, subtle signs of data center companies faltering highlight a vulnerability: a pullback in AI spending could trigger a broader recession.
• The Consumer Spending Mystery and Generational Wealth: Despite falling real wages, retail sales jumped more than 6% year-over-year last week. While Casselman admits that why the consumer hasn't cracked remains a "real mystery" that economists don't fully know how to explain, part of the resilience comes from wealthier Americans and retiring Baby Boomers. Although Casselman caveats that plenty of older Americans are struggling, in the aggregate, Boomers hold massive wealth in paid-off homes (or low locked-in mortgages), record stock portfolios (which a majority of Americans own via 401(k)s or direct holdings, though concentrated among the rich), high-interest savings, and inflation-indexed Social Security—even as they worry about their children and grandchildren.
• Presidential Control and Fiscal Constraints: Trump is repeating President Biden's 2024 political trap by trying to convince unhappy voters that the economy is thriving. While Casselman maintains his view that presidents have limited control over the broader economy—noting that inflation and low job turnover predate Trump—he emphasizes that Trump's signature policies (tariffs and the war with Iran) directly increased consumer prices. Meanwhile, massive deficits combined with high interest rates mean the federal government now spends $1 trillion a year strictly on national debt interest, limiting future policy options regardless of whether polls suggesting a Democratic "blue wave" materialize in the House and Senate.

Quotes

• At 2:56 - "But there's this big glaring thing that is wrong, and that is affordability. And that, of course, is the issue that matters most to a lot of voters, and it's kind of this big blaring klaxon that is going off in the economy right now." - Ben Casselman framing why strong headline economic numbers are being overshadowed by cost-of-living frustrations ahead of the midterms.
• At 11:25 - "But if you combine that slowing wage growth from 4 percent down to 3 percent at the same moment, just about, that inflation has done almost the opposite, right, has gone from around 3 percent to around 4 percent, now we have this situation where the value, the real value of people's paychecks is falling. By some measures, wages adjusted for inflation haven't grown at all since President Trump returned to office." - Ben Casselman explaining the exact mathematical intersection that is eroding American purchasing power.
• At 12:06 - "The challenge, I think, especially for Republicans, is that the weaknesses are really obvious and clear. They're easy to put on a campaign sign, they're easy for voters to understand and to feel. And the strengths are much more complicated. They're nuanced. They carry caveats in a way that doesn't make for great ad copy." - Ben Casselman analyzing why the ruling party struggles to campaign on macroeconomic strengths when voters face tangible daily price hikes.
• At 25:25 - "He has adopted some very specific policies, right, his signature policies, that very directly raised prices for consumers: tariffs, and then the war with Iran. And we can debate the merits of those, we can debate the trade-offs and whether they could be worth it, but there's no question that those, and especially the war with Iran, drove up prices at a time when Americans are laser-focused on the cost of living." - Ben Casselman distinguishing between broader economic trends presidents cannot control and specific executive actions that directly fueled inflation.
• At 26:58 - "And that means that the federal government is now spending a trillion dollars a year just on interest on the debt. And that has a real prospect of limiting the options for the future." - Ben Casselman highlighting how high interest rates and large deficits restrict the government's capacity to respond to future economic challenges.

Takeaways

• Look beyond the headline unemployment rate when evaluating labor market health; track job turnover and hiring rates alongside inflation-adjusted wage growth to understand whether workers actually have the leverage to get ahead financially.
• Monitor secondary ripple effects from geopolitical energy shocks—specifically diesel prices and home heating oil—as early indicators of broader consumer price inflation across food, trucking, and travel, rather than focusing solely on retail gasoline prices.
• Disaggregate consumer spending data by wealth and generation when assessing economic resilience, recognizing that aggregate retail strength driven by asset-rich retirees and high earners can mask stagnant purchasing power among younger, wage-dependent households.