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“It’s not just my opinion that things are weird,” Derek Thompson told me recently. It’s a fact of life, he explained, that the U.S. economy is behaving very strangely right now.

But first, here are three new stories from The Atlantic.

What comes after the search warrant? How California exported its worst problem to Texas The other Ukrainian army A Flopping Hose

We learned last week that unemployment in the U.S. is as low as it’s been at any time in the past 50 years, and a report released today shows that inflation slowed in July. Those are good things—and yet, economic output has also slowed in 2022, enough that economists are asking whether the country is in a recession.

I caught up with Derek Thompson, a staff writer and the author of the Work in Progress newsletter, about this huge disconnect between job growth and economic growth, and asked why it’s so hard to understand what’s happening with the economy right now. “If economic growth is really declining, it’s one of the strangest downturns in American history,” he told me.

Isabel Fattal: How should a regular, nonexpert person think about this moment in the U.S. economy?

Derek Thompson: When you’re thinking about the economy, you should think about three categories: statistics, labels, and feelings. Statistics, like the inflation rate or the unemployment rate, come from government surveys, and you should trust them, because they are highly descriptive of what is happening to the broader economy.

Feelings come from your personal experience in the economy. Is your local labor market good? How do you feel about whether your income is holding up against inflation?

Labels come from the National Bureau of Economic Research (NBER) Business Cycle Dating Committee. The label of “Are we in a recession or not?” is determined by eight economists. That has nothing to do with your feelings of the local economy at all.

Isabel: You wrote recently that “Are we in a recession?” is the wrong question to ask. Why?

Derek: There’s two reasons why it’s so hard to say whether we’re in a recession right now. Number one, the NBER is not going to render a judgment for several months, several quarters, or more than a year. So why debate now what we might not know for a year?

Number two, the GDP estimate that we just got from the Bureau of Economic Analysis is just that—an estimate—and the estimate will be revised. There’s about a coin-flip chance that the economy actually grew in the first half of 2022. What we know about recent growth unfortunately isn’t solid.

Isabel: What is one thing we do know for sure about the economy right now?

Derek: We know three things for sure. Number one, we know that inflation is very high, historically speaking—one of the highest rates in the past 40 years. Number two, we know that unemployment is low, as low as it’s been in 50 years. The labor market is roaring.

Number three, we know that growth is slowing down. We know that the GDP growth rate was really high in 2021, and we know that it’s slowing down in 2022. We don’t know if it’s what some economists would call a recession.

Isabel: As you’ve written, we’re in an everything-is-weird economy because different factors are behaving in contradictory ways; for example, jobs are growing, but the economy is shrinking. How should people deal with these mixed messages? What should we be paying most attention to?

Derek: Predicting the future of the economy is so hard that it’s useful to have a single metric to look for. The single metric I would watch is inflation, because if inflation starts to come down, as I believe it will in the next few months [it declined to 8.5 percent in July], the Federal Reserve doesn’t have to keep hacking up interest rates. If interest rates don’t keep going up, then the economy will probably get back to growth. So it all flows from inflation, and if I were interested in figuring out the direction of the economy, I’d be obsessed with watching energy prices, housing prices, and retail spending.

Isabel: How are Americans feeling about the economy right now? There’s a possibility that people’s feelings can actually affect where the economy goes from here, right?

Derek: It’s a really important point. Feelings aren’t imaginary. Feelings drive the economy, to a certain extent. When people are optimistic about the future, they spend more money.

But if you ask consumers how they’re feeling about the economy, they increasingly bifurcate by ideology. Republicans say they’re sad about the economy when a Democrat is in the White House. And Democrats say they’re sad about the economy when a Republican is in the White House. So it’s not as useful as it used to be to ask people about their consumer sentiment, because increasingly, consumer sentiment is just political sentiment.

On my podcast, Plain English, the economist Austan Goolsbee made the great point that in 1992, the entire presidential election was about an economic slowdown that had technically already ended. So statistically, the recession was over, but in vibes and feelings, the recession was deepening, and you had this electoral outcome—the defeat of the incumbent president—hinged on feelings of a recession that actually didn’t exist. That goes to show that even if feelings are disconnected from statistics, they still have real-world outcomes.

Isabel: Is this an unprecedented moment for the economy?

Derek: We’ve never had an economy like this, period. This is a cliché, but I’ve called this the pinched-hose economy. If you turn on the water in your backyard hose and you pinch the hose for a while, the water will build up, and then, when you release the hose, it’ll start sputtering wildly, and the hose will flop all over the place in a violent and strange manner. That’s what happened in the economy. We shut off the hose and said no one will fly, no one will go to restaurants, people won’t go to movie theaters. We purposefully shut down the economy because of the pandemic.

But then demand, which is the water, surged beyond supply’s capacity to easily fulfill it. That’s why we’re seeing the economic hose flopping all over the place. It’s why things are weird with baby formula, with gas prices, with airlines. That’s the hose flopping around. The hose is still flopping.

Related:

The three biggest mysteries about the U.S. economy Why we hate rising prices more than we fear losing our jobs Today’s News Donald Trump took the Fifth Amendment and declined to answer questions from the New York State attorney general’s office in the investigation into his company’s business practices. Russian forces killed at least 13 civilians and wounded others in a missile attack in southern Ukraine overnight. Ukrainian special forces also reportedly carried out a strike on a Russian air base in Crimea yesterday, a move that would mark a significant escalation in fighting. The Justice Department charged a member of Iran’s Islamic Revolutionary Guard with allegedly plotting to assassinate John Bolton. Dispatches Deep Shtetl: Yair Rosenberg explains how President Joe Biden keeps winning the internet by accident. The Weekly Planet: Congress just passed a big climate bill—not the one you think, Robinson Meyer reports. Evening Read (Remus86 / Getty)

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By Katherine J. Wu

Today’s most elderly bats aren’t supposed to exist. Ounce for ounce and pound for pound, they are categorically teeny mammals; according to the evolutionary rules that hold across species, they should be short-lived, like other small-bodied creatures.

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Sign up for The Weekly Planet, Robinson Meyer’s newsletter about living through climate change, here.

Yesterday, President Joe Biden signed into law one of the most significant investments in fighting climate change ever undertaken by the United States. The new act will boost efforts to manufacture more zero-carbon technology in America, establish a new federal office to organize clean-energy innovation, and direct billions of dollars toward disaster-resilience research.

No, I’m not talking about the Inflation Reduction Act, the landmark Democratic climate and taxes bill that passed the Senate on Sunday along party lines. I’m talking about a different piece of legislation: The CHIPS and Science Act.

Since it sailed through Congress last month, the CHIPS Act has mostly been touted as a $280 billion effort to revitalize the American semiconductor industry. What has attracted far less attention is that the law also invests tens of billions of dollars in technologies and new research that matter in the fight against climate change.

Over the next five years, the CHIPS Act will direct an estimated $67 billion, or roughly a quarter of its total funding, toward accelerating the growth of zero-carbon industries and conducting climate-relevant research, according to an analysis from RMI, a nonpartisan energy think tank based in Colorado.

That means that the CHIPS Act is one of the largest climate bills ever passed by Congress. It exceeds the total amount of money that the government spent on renewable-energy tax credits from 2005 to 2019, according to estimates from the Congressional Research Service. And it’s more than half the size of the climate spending in President Barack Obama’s 2009 stimulus bill. That’s all the more remarkable because the CHIPS Act was passed by large bipartisan majorities, with 41 Republicans and nearly all Democrats supporting it in the House and the Senate.

Read: [The best evidence yet that the climate bill will work]

Yet CHIPS shouldn’t be viewed alone, Lachlan Carey, an author of the new analysis and an associate at RMI, told me. When viewed with the Inflation Reduction Act, which the House is poised to pass later this week, and last year’s bipartisan infrastructure law, a major shift in congressional climate spending comes into focus. According to the RMI analysis, these three laws are set to more than triple the federal government’s average annual spending on climate and clean energy this decade, compared with the 2010s.

Within a few years, when the funding has fully ramped up, the government will spend roughly $80 billion a year on accelerating the development and deployment of zero-carbon energy and preparing for the impacts of climate change. That exceeds the GDP of about 120 of the 192 countries that have signed the Paris Agreement on Climate Change, Carey said.

By the end of the decade, the federal government will have spent more than $521 billion—nearly half a trillion dollars—to accelerate the development and deployment of zero-carbon energy and to prepare for the impacts of climate change, he added.

The CHIPS Act is not a comprehensive climate bill in the same way that the Inflation Reduction Act, or IRA, is. Unlike the IRA, the CHIPS bill isn’t supposed to drive immediate reductions in carbon pollution or subsidize the replacement of fossil fuels with cleaner alternatives. It probably won’t help the United States get closer to achieving its 2030 target under the Paris Agreement.

Instead, the bill’s programs focus on the bleeding edge of the decarbonization problem, investing money in technology that should lower emissions in the 2030s and beyond. That’s an important role in its own right. The International Energy Association has estimated that almost half of global emissions reductions by 2050 will come from technologies that exist only as prototypes or demonstration projects today.

To get those technologies ready in time, we need to deploy those new ideas as fast as we can, then rapidly get them to commercial scale, Carey said. “What used to take two decades now needs to take six to 10 years.” That’s what the CHIPS Act is supposed to do, at least in theory.

The law, for instance, establishes a new $20 billion Directorate for Technology, which will specialize in pushing new technologies from the prototype stage into the mass market. It is meant to prevent what happened with the solar industry—where America invented a new technology, only to lose out on commercializing it—from happening again, Carey said. Although the directorate will focus on broad improvements across technology, such as AI and high-performance computing, two of the directorate’s 10 new focus areas are climate or clean-energy related. Congress has explicitly tasked the new office with studying “natural and anthropogenic disaster prevention or mitigation” as well as “advanced energy and industrial efficiency technologies,” including next-generation nuclear reactors.

Read: [Why America doesn’t really make solar panels anymore]

The bill also directs about $12 billion in new research, development, and demonstration funding to the Department of Energy, according to RMI’s estimate. That includes doubling the budget for ARPA-E, the department’s advanced-energy-projects skunk works. (ARPA-E is modeled on DARPA, the Defense Department lab that helped give rise to GPS, the internet, weather satellites, and some mRNA vaccines.)

And it allocates billions to upgrade facilities at the government’s in-house defense and energy research institutes, including the National Renewable Energy Laboratory, the Princeton Plasma Physics Laboratory, and Berkeley Lab, which conducts environmental-science research.

RMI’s estimate of the climate spending in the CHIPS bill should be understood as just that: an estimate. The bill text rarely specifies how much of its new funding should go to climate issues. So whenever possible, Carey and his colleagues extrapolated from existing agency spending. For instance, the National Science Foundation has spent about 5 percent of its budget on climate and clean-energy research over the past few years, so the team assumed that about that portion of the NSF funding in CHIPS would go to those topics, he said.

Regardless of exactly how much new climate spending CHIPS ends up generating, the broader trend is clear. When you add CHIPS, the IRA, and the infrastructure law together, Washington appears to be unifying behind a new industrial policy, focused not only on semiconductors and defense technology but clean energy. The three bills combine to form a “a coordinated, strategic policy for accelerating the transition to the technologies that are going to define the 21st century,” Carey said.

For the past few years, scholars and experts have speculated about whether industrial policy—the intentional use of law to nurture and grow certain industries—might make a comeback to help fight climate change. Industrial policy was central to some of the Green New Deal’s original pitch, and it has helped China develop a commanding lead in the global solar industry.

But with these three bills, little doubt remains about the direction of the U.S. economy, Carey told me. “Industrial policy,” he said, “is back.”