Former Obama economic adviser feels ‘a little bad’ about Trump’s affordability crisis

Jason Furman, professor at the Harvard Kennedy School of Government and former chairman of the Council of Economic Advisers under Obama, said CNBCThe “Squawk Box” On Wednesday, pessimistic consumers overlooked gasoline prices that remained affordable, making Trump’s task to solve the affordability crisis more difficult.

Gas prices in December marked the they were the lowest all yearAccording to data from the AAA automobile club, unleaded gasoline is $0.18 cheaper nationally this year than last year. National average prices hit their lowest level Monday, reaching $2.85 per gallon. This has not damaged consumer confidence fall to its lowest level since April, and approval ratings indicating that more Americans disagree with how Trump is handling the economy.

“I was perplexed,” Furman said. “When you’re in government, you’re told, politically, that the only price that matters is the price of gas. That’s the only price that’s been great this year. And I feel a little bad for President Trump that he doesn’t get any credit for that.”

Trump continued to issue his own mixed signals on the affordability crisis, notably saying in a prime time address last week, he inherited the economic “mess” from the Biden administration, proposing to cut checks for millions of military personnel for housing supplements, while simultaneously calling the economy the strongest it has ever been.

According to Furman, Trump also has a somewhat harsh side: Consumers are concerned about inflation and the price of food, which has increased. increased by almost 30% over the past five years, making it harder to assuage economic concerns, even in the face of other optimistic signals.

“Consumers are in this situation: whatever the highest price is, that’s the price they’re going to focus on and that’s going to bother them,” he said. “And it’s a really difficult problem to solve economically or politically.”

Mixed economic signals blur K-shaped economy

The conflicting economic indicators go beyond prices, Furman said. The United States experienced its strongest economic growth in two years in the last quarter, with GDP growth of 4.3%exceeding previous analysts’ estimates. Meanwhile, the unemployment rate climbed up to 4.6% in November, according to the Bureau of Labor Statistics, significantly higher than last November’s 4.2% and above 4%, which is considered reasonable.

“If you only had the employment numbers, we would all be assessing our recession probabilities right now: Is it 30%? Is it 50%? Is it 70%?” » asked Furman. “But then we have this GDP growth number, and that just gives us our probability of a boom.”

Unlike many economists who see an unbalanced K-shaped economy If the rich are getting richer while the poor are getting poorer, Furman isn’t so sure. He noted that in addition to some persistently low prices, such as gasoline, wage growth remains strong, an indicator associated with increased spending and productivity. To be sure, data from the Federal Reserve Bank of Atlanta, the Fed says wage growth for the lowest-earning quartile of Americans has fallen from a peak of 7.5% in 2022 to about 3.5% today, its lowest level in 10 years.

“I’m less convinced than others about this K-shaped recovery,” Furman said. “Everyone wants prices to be 25% lower. Nobody wants their wages to be 25% lower.”

Other economists, such as KPMG chief economist Diane Swonk, see the connection between economic growth, rising unemployment and the K-shaped economy. said Fortune strong GDP growth indeed reflects a K-shaped economy in which, in addition to resilient consumer spending and soaring corporate profits, companies have learned to expand without hiring, to increase margins without expanding their teams, a trend that could be exacerbated by AI is replacing jobs.

“Our view is that most of the productivity gains we’re seeing now are really just the result of companies being reluctant to hire and doing more with less,” she said.