The costs of many daily necessities, including groceries, are escalating beyond the average inflation rate, according to Lonnie Golden, professor of economics and labor-human resources. Credit: Douglas Rissing/Getty Images. All Rights Reserved.

ABINGTON, Pa. — Even as the Federal Reserve moves to raise interest rates for the first time in three years, many of the metrics that economists rely on to gauge the overall health of the economy — like jobs reports, the unemployment rate and the stock market — have looked relatively strong in recent months. Despite this, only about 24% of Americans rated the economy as “good” or “excellent” in a recent Pew Research Center survey. According to Lonnie Golden, professor of economics and labor-human resources at Penn State Abington, this friction is due in part to a disconnect between messaging and the day-to-day lived experiences of many Americans.

Golden is an expert on the well-being of work and workers, which often requires him to look at stories about the economy and labor market from a more nuanced perspective. Digging deeper into the specifics behind the most common economic metrics, he said, is often required to piece together a more complete image of the reality for many Americans.

In the following Q&A, Golden discussed the current economic landscape and how differences in politicians’ rhetoric and people’s perceptions on the ground can influence economic expectations.

Golden: Overall, the economy is fairly healthy, by the numbers. We can give it a three and a half stars out of five based on the last month, particularly the strong August jobs report, with the September report pending. It's probably more accurate to say it's been surprisingly resilient. There’s a lot of chaos going on, both self-imposed and externally imposed. But labor market performance seems to be healthy despite these forces.

We've also seen the real gross domestic product growth rate go up by a percent or two recently. The labor productivity rate — a key metric for economists that measures how much output we get per worker per hour — has gone up a little bit as well over the last few years. It's not falling or even stagnant. It's not, however, as strong as we would like it to be, because that's the underlying driving force for sustained economic growth in the long term.

Golden: For a lot of folks, expectations play a role. Take inflation, for example. Inflation is still climbing at the rate it has been over the last few years, but the key trend we want to follow is whether earnings from labor are keeping up with that. At least over the last few months, earnings have been lagging the inflation rate just a bit. So, if our expectation is that our earnings are going to exceed inflation, that is not happening.

It’s also important to look not only at overall prices, but at which prices specifically are escalating. What people encounter the most are daily necessities like rent, groceries and energy expenses, as well as recurring costs like insurance and out-of-pocket medical expenses — all of which have been escalating beyond the average inflation rate.

Gas prices are another important factor, of course, as a lot of consumers and workers depend on driving and cannot adjust easily or quickly when prices are escalating. And as fuel prices rise, that’s eventually going to filter into other prices. In particular, it's going to make transportation and shipping generally more expensive. As a result, if people are expecting prices to level off or come down, that's probably not going to happen anytime soon.

Golden: When politicians have the microphone, they might positively spin the numbers, but what they’re doing, in part, is also driving up expectations. I think that's part of the underlying frustration with politicians in power who are presenting the state of the economy as really strong when people are experiencing it differently. People are frustrated with the fact that prices have escalated not only from what they were, but beyond what some people have said they’re going to be.

People who are fortunate enough to have income from property or other financial assets might be able to stay ahead, but those don’t necessarily translate into a higher standard of living until you sell them, even if it makes you feel good that the economy is generating potential income and wealth for you in the future. People who don't have many financial assets, however, are having trouble keeping up. So, for politicians that say the economy's numbers are looking good on average, there's going to be a gap between what they say and what most people are experiencing if they rely mainly on their labor market earnings. And to keep up, many are at least periodically taking multiple jobs, which creates other pressures such as time scarcity and fatigue.

Golden: The Federal Reserve met and decided unanimously to hike the federal funds rate — the rate that the Federal Reserve charges banks for their overnight lending — by a quarter point. This decision filters through other interest rates throughout the economy. This is one tool in the Federal Reserve’s limited toolset that they can use to slow down consumer borrowing in an attempt to bring down inflation. So, the average person that's looking to borrow money for a new car or home is probably not going to be happy about a higher loan rate.

My main concern as an economist, however, is that the source of the current rate of inflation is not necessarily mostly an overheated economy, where people are spending too much or too fast — although they are borrowing more and saving less recently. It's mostly coming from the supply side, where costs are increasing. There's not much the Federal Reserve can do about energy costs, tariffs or a relatively slow productivity growth rate other than pushing up these federal fund rates to slow down consumer borrowing and address inflation from the demand side.