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Barry Ritholtz: 3 reasons why economic recovery goes unappreciated

There has been a steady drumbeat of dissatisfaction about the post-credit-crisis recovery. No matter how much the economy improves, a good number of people insist it hasn’t. Now, in the political silly season, it has intensified as candidates pander to voters.

This subject came up again recently on the FiveThirtyEight website with a column headlined “The Economy Is Better – Why Don’t Voters Believe It?” It tells of an Iowa business owner whose company is having a “record year.” Despite this, she is the leader of a local tea party group whose view of the U.S. economy is, well, at war with the facts.

“The Federal Reserve is devaluing the dollar” she said, despite the U.S. currency being at its strongest in almost 13 years.

“Inflation is too high,” she said, even though it is running at less than 2 percent.

“Taxes are too high,” even though most people pay some of the lowest effective rates in decades.

And those statistics showing improvement in the economy? They are “misleading if not outright lies ... The unemployment rate isn’t down.” Of course, at 5 percent it’s the lowest in seven years.

Some of the discontent is understandable, and three important factors are at work: The benefits of the recovery haven’t been spread evenly. There is noise in the numbers. And there is plain old ignorance. Let’s jump right in:

An uneven recovery

For many people, the rebound from the 2008-09 credit crisis has been mediocre or nonexistent. These folks are not delusional – their personal situations are bad. Too many people remain unemployed or underemployed, and pay increases often don’t keep up with even the minimal U.S. inflation. Meanwhile, two of the biggest costs of living – housing and health care – have far outpaced wage gains.

When we look at how key factors affect the state of your personal recovery, three stand out: industry, education and geography. Clearly, some have been enjoying a very robust recovery while others have not. The major coastal cities, the industrial heartland and (up until the price of oil collapsed a year ago), the energy-producing regions have been booming.

Consider this from the latest Bureau of Labor Statistics report: People with bachelor degrees or higher have an unemployment rate of 2.5 percent; for those without a high school diploma, it’s 6.8 percent (and that’s down from much higher). If you are in what the BLS describes as professional and related occupations such as “management, business and financial operations,” your unemployment rate is 2.2 percent. A labor market that tight usually means more competitive wages. The labor participation rate is very telling: 74.3 percent for degree holders vs. 44.8 percent for high school dropouts.

I would love to find or create a chart showing how uneven this recovery is compared with earlier ones. I suspect it might yield some interesting results.

Misleading noise

Relentless noise is generated by the Internet, the media and the jostling by the presidential candidates for political advantage. I don’t care about your party affiliation, ideology or favorite candidate: Combining politics with investing is a giant money loser.

Yet the airwaves are filled with a relentless fire hose of uninformed opinion, biased commentary and failed analysis. It’s a constant battle to separate signal from noise in the media and on the Internet.

Humans function with cognitive biases and flawed wetware, and they are easily fooled and manipulated. Relying on your brain for off-label use is a persistent issue for investors.


This is as old as humanity. Plenty of folks, such as the business owner quoted above, don’t want to know the truth. We all live in a subjective reality of our own construction.

But beyond a certain point, that tenuous tie to the objective universe breaks down. After that, a person is living in a wholly fabricated reality. It should come as no surprise that those who drink deeply from certain information sources have a natural affinity for nonsense. They sound just like the woman having a record year who complains about how awful the economy is.

The good news, at least for the more rational among us, is that the Internet never forgets. It’s very easy to learn who has created a track record of horrific advice, bad predictions and other absurdities.

Don’t expect the foolishness to stop anytime soon, especially as the political campaigns heat up. All you can do is be smart about it, and not let it affect your portfolio or trading.

Barry Ritholtz, a Bloomberg View columnist, is the founder of Ritholtz Wealth Management. He is a consultant at and former chief executive officer for FusionIQ, a quantitative research firm.,