If the economy is growing, why do I feel so left behind?

Thursday brought about the first “estimate” of gross domestic product for the third quarter of 2023 (there are two more to come), and it surpassed already strong expectations, showing a seasonally adjusted annualized increase of 4.9%. This is up significantly from 2.1% in the second quarter of the year, and it is the highest gain in GDP since the fourth quarter of 2021.

The Biden administration and the mainstream media will no doubt use the news to take victory laps and say, “See, we told you the economy was amazing!”

Meanwhile, odds are you are scratching your head and thinking, “My personal experience is completely different. How could this be?”

You are not wrong. Let me explain a bit about what’s really happening.

First, there are components impacting the GDP growth besides what’s going on at home.

Government spending continues to lift GDP, and we will continue to pay the price for that over the short and long term. The government spending increase was recorded year-over-year at 4.6%.

Inventories were also up. COVID mandates created first an undersupply and then an oversupply in inventories, so this is likely an investment made by companies to normalize inventories after a very unusual cycle.

But consumers, who account for the lion’s share of the economy, kept spending. Per Jeff Cox at CNBC, “Consumer spending, as measured by personal consumption expenditures, increased 4% for the quarter after rising just 0.8% in Q2 and was responsible for 2.7 percentage points of the total GDP increase.”

If you are struggling to keep up with increases in prices, how can this be?

First, that struggle is the answer. As consumers have jobs (some with two jobs), they are still willing to spend, and that is costing them more and more. Many Americans have dipped into savings, and many Americans have taken on more debt to do so or are just treading water.

As several commentators are pointing out across social media today, even though real GDP is adjusted for inflation, it is adjusted for the inflation that is reported by the government. We all know the tricks that have been plaguing the inflation calculation for decades, which means what you are experiencing are higher prices than what are being reported.

And, with that, if you adjusted for the inflation that you were actually experiencing, the real GDP would probably be much lower. GDP is being inflated by the differential between what is reported and what you are having to spend. (By the way, this differential between what’s reported and reality impacts the other GDP components.)

This harmonizes with a note included in the Bureau of Economic Analysis' GDP release, “Real disposable personal income decreased 1.0 percent, in contrast to an increase of 3.5 percent” in the second quarter.

Additionally, as reported a couple of weeks ago by the Wall Street Journal, Americans 65 and up are spending freely.

“In August, 17.7% of the population was 65 or older, according to the Census Bureau, the highest on record going back to 1920 and up sharply from 13% in 2010,” the Journal reported. “The elderly aren’t just more numerous: Their finances are relatively healthy and they have less need to borrow, such as to buy a house, and are less at risk of layoffs than other consumers.”

For the first time since 1972, when records began, Americans 65 and up made up the largest spending cohort, surpassing the usual “big spenders” of Americans ages 45-54. If you are not in this cohort, this can explain the difference. If you are in this cohort and still struggling, obviously the experiences of individuals vary widely, and we have seen massive wealth transfers to the already wealthy at the expense of savers and retirees with fewer assets. When we look at the data as a whole, it doesn’t tell each American’s particular story.

Finally, while economists will point to strong net worth numbers, the absolute cluster of the economy’s foundation after so much central bank manipulation and fiscal irresponsibility shows what is on paper is not reality.

If your house has increased in value on paper, you probably don’t feel much wealthier. You may be unable to sell your home, because with a low mortgage rate locked in versus an 8% rate today, and the increase in prices across housing with low supply, where would you go and how would you come out ahead (especially when buying a more expensive house can increase property taxes, too)? Meanwhile, your everyday cost of living has skyrocketed.

These are the realities and nuances that the top tier simply refuse to acknowledge.

Having had almost 15 years of interest rate suppression and money printing unprecedented in size and scope, it will take quite some time before the total impacts are felt throughout the economy and show up in the broader data set.

My advice? Keep doing what you can to reduce your spending, ensure your emergency fund covers at least 12 months of living expenses, and make sure your cash is earning something.

In a bright spot for spending, retailers like Walmart and Aldi have announced they are reducing prices on some Thanksgiving and holiday meal specials to help with inflation. Keep an eye out for more deals and places to save during a time of year that can get very expensive.

The elite will keep spinning that things are great, but don’t feel like you are going crazy. This is the result of their actions, yet they will never face accountability on their own. We must hold them to account ourselves.