SCOTT DETROW, HOST:
Despite the recent political dysfunction here in Washington, the U.S. economy is ending the year on a high note. New figures released last week showed that GDP grew at an annual rate of more than 3% in the late summer and early fall. And yet, many Americans remain frustrated by the high cost of living. We're going to talk through some of the economic facts and feelings about the year ending and what's ahead with NPR's Scott Horsley, Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi, good to be with you.
DETROW: Let's start here. A survey from the University of Michigan last week showed that Americans' attitudes about the economy are improving, but they are still not great. So what's going on?
HORSLEY: Yeah, by most objective measures, this is a really good economy, but people who are struggling to keep a roof overhead or put food on their table just don't necessarily feel that way. Reporters like me can talk all we want about strong GDP growth or the near-record number of women in the workforce, but to people like Teresa Wolf (ph) in Tampa, that just sounds out of touch.
TERESA WOLF: The facts are, if inflation was where it should be and food prices had come down and rents are under control, honestly, I don't think there's any way that Trump would have been reelected.
HORSLEY: Of course, Donald Trump did win the election last month, and polls suggests voters' unhappiness with the economy was a big part of that.
DETROW: So here's where we are - inflation has come down, but most prices still haven't fallen. Is that a big reason why people are still grumpy?
HORSLEY: It is, yeah. Inflation has cooled off considerably, but that just means prices aren't going up as fast as they had been. It generally doesn't mean prices are coming down, so Federal Reserve Chairman Jerome Powell says he gets why people are unhappy with that.
JEROME POWELL: We understand very well that prices went up by a great deal, and people really feel that, and it's prices of food and transportation and heating your home and things like that. So there's tremendous pain in that burst of inflation that was very global. This was everywhere, in all the advanced economies at the same time.
HORSLEY: Now, that worldwide spike in prices was primarily caused by fallout from the pandemic and Russia's invasion of Ukraine. But here in the U.S., government spending likely contributed a bit as well. The good news is wages are catching up now. Average wages have been going up faster than prices for the last 19 months, and with inflation cooling off, workers' real buying power should continue to grow.
DETROW: But it's not just high prices, it's also high interest rates.
HORSLEY: Yeah, that's right. The Federal Reserve raised interest rates a lot to crack down on inflation. And while they've now begun to lower those interest rates, borrowing costs are still a lot higher than they were a few years ago, and that's really a double whammy for anyone trying to buy a house or a car or some other big-ticket item. Teresa Wolf sells appliances for a living, and a lot of her customers have to finance those purchases. When the average interest rate on a credit card is more than 20%, that can be really costly.
WOLF: I meet the ordinary people all day long. Those are who I deal with, and all I hear is complaining how hard it is.
HORSLEY: That's especially true for lower-income families. Three-quarters of the people earning less than $50,000 a year say the economy is poor. And even among people earning twice that much, there's a lot of dissatisfaction. You know, Ellie Currence (ph) lives outside Kansas City and has a young daughter. She and her husband would like to move to a better school district, but Currence told me that just feels like a pipe dream right now.
ELLIE CURRENCE: It's just hard. I work full-time. My husband works full-time. You know, I feel like at this point we're moving more towards survival mode rather than thriving.
DETROW: All right, so, Scott, key question going into 2025, does President-elect Trump have a solution for any of this?
HORSLEY: Not really. His main prescription for lowering prices is to increase domestic energy production. But, you know, that's already at a record high. And economists say some of Trump's other policy proposals could actually push prices up. Congressional forecasters say the tariffs that Trump talked about would raise prices, especially for lower-income families, and mass deportations could also increase prices and make it harder for employers to keep adding jobs. That said, Trump voters, like Teresa Wolf, are generally upbeat about what's in store. I spoke to her just a few days after the election and she said her biggest feeling was relief.
WOLF: I am elated and I have hope. Many, many, many people I know are super excited. Even my daughter, who's a liberal, is a Trumper. We've had enough.
HORSLEY: In the AP survey, almost 7 in 10 Republicans said they expect the economy to get better once Trump's in office. On the other hand, 6 out of 10 Democrats expect the economy to get worse. This is basically a mirror image of what we saw four years ago. You know, the country is so polarized and so evenly divided, it's really hard to get agreement, even when most yardsticks say the economy's in good shape.
DETROW: NPR's Scott Horsley, thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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