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Why Americans feel gloomy about the economy despite falling inflation and low unemployment

By Wong Kon How

Inflation has dipped to its lowest point in two-and-a-half years, with unemployment holding steady below 4 percent for the longest time since the 1960s. Despite these positive economic indicators and the US economy defying recession predictions, a majority of Americans maintain a bleak economic outlook.

“Most Americans," "are not just looking for disinflation”- a slowdown in price increases. “They’re looking for deflation. They want these prices to be back where they were before the pandemic. ... I hear that from my family.” - Lisa Cook, a member of the Federal Reserve's Board of Governors

That's particularly true for some of the goods and services that Americans pay for most frequently: Bread, beef and other groceries, apartment rents and utilities. Every week or month, consumers are reminded of how far those prices have risen.

Even with inflation back at 2%, we will not see prices of goods and services return to the pre-pandemic levels unless we are expecting a deflation. Deflation, characterized by a widespread drop in prices, typically makes people and companies reluctant to spend and is therefore undesirable.

Instead, a more effective approach to address this inflationary trend is through real wage growth, where the goal is for wages to rise faster than prices, ensuring that consumers still benefit. Singapore has been advocating for this policy since the beginning.



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