The cases for hope and despair about the U.S. economy : The Indicator from Planet Money Should we feel hope or despair about the future of the American economy? Cardiff and Stacey debate.

Hope Vs. Despair

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Hey, everyone. Stacey and Cardiff here. This is THE INDICATOR FROM PLANET MONEY. And it has been a while since Stacey and I have put on our holsters, stared across from each other for a good old-fashioned gunslinging shootout. Right?


Well, you know, Cardiff, I always worry that, you know, these things are very hard on you, so I try not to make you do them too frequently, you know.

GARCIA: I also don't know why I'm talking like I'm in a Sergio Leone flick. So, yeah, I don't know.

VANEK SMITH: Because we should always be talking like we're in a Sergio Leone movie.


VANEK SMITH: We need the music, the fistful of dollars, the doo-doo-doo-doo-doo-doo-doo-doo (ph)...

GARCIA: Bring it on.

VANEK SMITH: You know, though, the U.S. economy is in this very uncertain place right now. There's the election coming up. Congress and the White House have not agreed on a new bill to provide aid and stimulus. And the economic indicators are pointing in all kinds of different directions.

GARCIA: Yeah. So based on those indicators, is the case for hope stronger or weaker than the case for despair? Today on the show, Stacey and I debate. We take sides. And to decide which side, we're flipping a coin.

VANEK SMITH: Flip out at the O.K. Corral.

GARCIA: Dang right.

VANEK SMITH: (Laughter).

GARCIA: Heads - I make the case for hope, and, Stacey, you are despairing. And if it's tails, you get to be hopeful. So here we go.

VANEK SMITH: All right. I'm hoping for hope.


GARCIA: It's tails, which means you get to be hopeful. And I bring the despair.

VANEK SMITH: Oh, I'm so excited. I mean, I'm excited to be the voice of hope, Cardiff. I feel like there's a part of you that's excited to be the voice of despair. Am I wrong?

GARCIA: A little bit. A little bit.

VANEK SMITH: (Laughter) OK.

GARCIA: So, yeah, the U.S. economy after the break - the good, the bad and the, I guess in our case, the smugly.

VANEK SMITH: Oh, nice. Prepare to be crushed, Garcia. Prepare to be crushed. It's happening.


GARCIA: OK, folks, I will be arguing the case for pessimism, for despair about the U.S. economy. Stacey is arguing the case for hope. Stacey, you get to draw first.

VANEK SMITH: OK, Cardiff, here it is, the case for hope. The U.S. economy is coming back. Economists are forecasting that the economy rebounded very strongly in the third quarter of this year after a very terrible second quarter. The official numbers for the third quarter have not been released yet. They come out next week. But it is possible that the economy was up to 8% bigger than it was in the second quarter. That is just enormous.

GARCIA: That definitely for sure would be a really strong number. But let's remember that the third quarter included the month of July, when the economy was still running on the stimulus provided by the CARES Act. That was the big government spending bill that provided an extra $600 a week in unemployment benefits to people who were out of work. But those extra benefits expired at the end of July. So the stimulus by now is probably wearing off. And also, we still have almost 7 million more unemployed people in the country than back in February, before the pandemic started. And I'm really worried about them now that they're not getting that extra help.

VANEK SMITH: Yes, you're totally right that the high unemployment rate has been absolutely crushing. But the reason for hope is that, Cardiff, this very unemployment rate that you refer to has actually been falling. So remember, the worst economic damage from the pandemic was in the early months of March and April. Since then, the unemployment rate has fallen from about 15%, where it peaked, down to about 8% as the economy has recovered. That is a huge recovery in a pretty short amount of time.

GARCIA: That's true for sure and a hopeful sign. But we have to recall that not all unemployment is the same. Most of the people who have already gotten their jobs back only lost those jobs fairly recently. But the number of long-term unemployed people is actually still going up each month. These are people who lost their jobs more than half a year ago, and they have not been rehired. And the longer they go without a job, the more likely it is that they're going to lose their contacts and lose their skill sets and really struggle to find work again later.

VANEK SMITH: You make some fair points, Cardiff. And I would respond that if the economy keeps growing, though, eventually those jobs will come back. And there is a really good reason for hope that the economy will, in fact, keep growing, and that is consumer confidence. In September, consumer confidence shot up by the most it has in 17 years, which means that people in the U.S. are planning to keep spending money because they are optimistic about the economy. For example, the share of people who are planning to buy a major appliance like a refrigerator or a stove or something like that is the highest it's been in seven months. And all that spending is going to keep the economy growing. There we go. Cardiff Garcia, mic drop. I think we should just call it right now.


VANEK SMITH: I have won.

GARCIA: Because consumers can be wrong. I mean, just because you're planning to buy the latest OXO coffeemaker with that sleek thermal carafe does not mean you actually will if suddenly the economy goes bad. But I would also point to a big split in precisely what people are spending money on. So specifically, yes, people are spending more and more money on goods for the home like furniture and electronics. But consumers are still not spending much money on services, on things like eating at restaurants or on traveling. And that's a problem because, for example, restaurants and hotels are a huge source of employment for low-income workers. So I'm just worried about people who rely on those jobs coming back, especially since - remember, again - those extra benefits for the unemployed already expired almost three months ago.

VANEK SMITH: Cardiff, I think you should go ahead and splurge and buy yourself that fancy coffee carafe, and here's why. So you keep mentioning that the benefits for unemployed workers have expired, and that is true. But it is also true that not all of the money from those benefits was spent right away. A lot of that money was saved. Plus, people who kept their jobs have also saved more money since the pandemic started because all the business lockdowns meant there were fewer opportunities to spend their money. And, you know, people were maybe hunkering down a little bit, too. And what this means is that a lot of households out there still have money saved up, money that they can start spending in the economy on things like fancy coffee carafes.

GARCIA: Indeed, though we also do know that a lot of the unemployed workers have already spent down a lot of their savings. According to the JPMorgan Chase Institute, the unemployed spent about two-thirds of their added savings in August. That was the first month after the benefits expired, which means that by now, their finances could be getting really tight. And so they may have to cut back on some of their spending.

VANEK SMITH: Cardiff, you have now perfectly set up my final argument in the case for hope.

GARCIA: Hate it when I do that.

VANEK SMITH: (Laughter) That is policy. It is not too late for the president and Congress to make another deal before the election in order to stimulate the economy. Those negotiations are still happening. And also, the Federal Reserve has been using monetary policy to help boost the economy. For example, low interest rates have given a big boost to the housing market. And historically, the housing market has been a good sign of where the rest of the economy is headed. And the housing market is doing quite well.

GARCIA: Yeah. I definitely concede the point about the Fed and the housing market. But the Federal Reserve itself has also said that what would be really useful for the economy is another bill like the CARES Act from the president and Congress. And all I'm saying to you is that if the case for hope relies on politicians striking a deal, agreeing on something, that might be the most despairing thing of all.

VANEK SMITH: And that is it. That is the debate. And, of course, I thought I would be an excellent judge of who won this debate, but Cardiff had issues with it. So we would love to hear from you. If you thought the case for hope or despair was the strongest, you can email us - And, Cardiff, I think the loser should buy the winner that fancy coffee carafe.

VANEK SMITH: It's pretty expensive.

GARCIA: My consumer confidence isn't high to make the bet.


GARCIA: This episode of THE INDICATOR was produced by Darian Woods and fact-checked by Sean Saldana. Our editor is Paddy Hirsch. And THE INDICATOR is a production of NPR.

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