Politicians usually tout two numbers to show that they are either doing a great job: the unemployment rate and the Dow Jones Industrial average. Right now, unemployment is at 4.2%, the lowest it's been since 2000, and after crossing 20,000 the stock market continually sets new records.
But what does that mean for the average American?
The flaws associated with how we measure unemployment in the United States are well known. While a lower unemployment rate is certainly better than a higher one, the rate doesn't capture workers who've quit looking for a job, part-time workers who wish to work full-time, or workers who've experienced a significant wage reduction in a new job after they lost their old one. Indeed, one of the characteristics of the modern global economy isn't joblessness, but workers with a full-time job who struggle to afford housing, healthcare, and an education.
The stock market is the other way we measure economic health--especially in politics and popular media. Bill Clinton took credit for the race to 10,000 that defined the 1990s market, and Donald Trump is taking credit for the bull market that's occurred during his first months in office.
Like unemployment, the market is a flawed way to measure a society's economic health. According to Gallup, just 52% of Americans own stock. That's only the second time the percentage has been that low in the 20 years Gallup has tracked stock ownership. However, according to NYU economist Edward Wolff, the wealthiest 1% of households own 38% of all shares of stock.
A lower unemployment rate is better than a higher unemployment rate. A bear market is better than a bull market (unless you happen to work for a company that saw its share price increase after they laid you off).
No one is arguing that.
But if you've stopped looking for a job, are employed but earning less than you used to, or don't own stock (or own a negligible amount of stock), neither the unemployment rate nor the Dow Jones Industrial average says much about your economic well-being.
In other words, politicians and the media focus on the wrong metrics--and even when different economic measurements get a little attention, we still don't get it right. In 2016, median household income finally surpassed its 1999 high. That's better than not surpassing the high, but many stories failed to mention the drastic increase in the cost of healthcare and education that's occurred over the past 18 years.
Why does focusing on the wrong economic data matter?
At various points in the Clinton, Bush, Obama, and Trump administrations, new stock market records and historically low unemployment rates were used as a synonym for a booming economy, or after the financial crisis, to signal that the economy was recovering--even though many workers and households experienced stagnating or steadily declining incomes for years or even decades.
It's easy to see how reading about a booming economy while you struggle to pay your bills can metastasize into the anger and rage that is defines politics in the United States and abroad.
Yes, the unemployment rate and the stock market are important, but using them as the sole measurement of a society's economic well-being is kind of like saying you're healthy because you have two working arms. That's better than not having two working arms, but it doesn't say anything about how your heart or kidneys are doing.
In the United States economy, the twin arms of the unemployment rate and the stock market are, for the moment, working just fine. But the heart of the economy--the ability of the average family to get ahead--is not healthy.
If we want to change that, we need to start by focusing on the right data.