 | This article may be unbalanced toward certain viewpoints.(June 2024) |
Vibecession is a neologism that refers to a disconnect between the economy of a country and the general public's negative perception of it. The term was coined by Kyla Scanlon in a June 2022 newsletter about Americans' view of their economy. [1] It is a portmanteau of the words 'vibes' and 'recession'. [2] [3]
The United States is considered by some journalists to have entered a period of vibecession in early 2022, which continued throughout 2023 and was speculated by some to end around January 2024. [4] [5] [6] [7] [8] However, Americans' concerns about the economy shifted in 2024 to the job market. [9] [10] 59% of adults surveyed by Affirm Holdings in June 2024 believed the country was in recession. On average, respondents pointed to March 2023 as the start of it. [11]
When polled, most Americans had a negative perception of the economy, with some saying that it had even entered a period of recession, while data showed that inflation was going down and GDP growing. This pessimism about the overall economy was found even among Americans who had a mostly positive perception of their own financial situation. [12] This alleged vibecession is believed to have been one of the major causes of President Joe Biden's decline in popularity around that time. [13]
The American vibecession was mostly blamed on the news media, specifically the market incentives that drive both traditional and alternative news outlets to focus on dramatic and negative news, such as some economists predicting a recession for 2023 that never came. [14] The public itself is also said to have negativity bias, in other words, people tend to choose to watch and read negative rather than positive news. [15]
Critics, such as Ben Wright and Ruchir Sharma, have called the term "condescending". In a March 2024 article for The Daily Telegraph , Wright felt the explanation for the discrepancy between the United States' economic performance and Americans' perceptions of it was obvious: inflation, price increases, and that Americans were saving less and racking up more debt. He described it as "absolutely no coincidence" that the percentage of voters positive about the economy's direction according to USA Today /Suffolk University polls fell to 9% in June 2022, the month after price increases peaked. [16] In a June 2024 article for the Financial Times , Sharma argued the "flaws in the economic system are real" and discussed generational inequality, with only a third of American adults reporting being better off than their parents, and the idea the economy is "rigged" against the average person. He wrote "normal people don't live for quarterly GDP numbers". While partisanship played a role, he felt it was not enough to explain registered independents and Democrats also reporting a negative outlook on the economy. [17]
However, both Wright and Sharma agreed Biden was not to blame for these phenomena, with Sharma attributing them to longer-term trends of growing inequality, [17] and Wright pointing out that Trump had inherited a favourable economy during his first term, while Biden had to navigate more challenging circumstances. Wright also believed Trump's economic policies for a potential second term, such as tariffs, "would clearly exacerbate the problem". [16]
Similar to Sharma's point, Cetera Financial Group's Gene Goldman and JP Morgan's Joyce Chang also attributed the disconnect to inequality. Goldman echoed that "Lower income households are not keeping up... Everything looks great but when you look beneath the surface, the disparity between the wealthy and nonwealthy is widening dramatically." [18]
Andrew Keshner of MarketWatch claimed the vibecession can be measured by the ability to save, pointing out that while inflation had cooled as of April 2024, Americans' personal savings rate remained "stubbornly low" at the time, indicative of what he described as a "complicated and sometimes contradictory" economic picture. [19]
Attempting to explain why consumer confidence had not recovered to pre-pandemic levels by June 2024, macro strategist Sonu Varghese and market analyst Tom Schneider suggested some further potential causes to US News in the housing market; sticker shock from price increases, with food prices being 20% higher and gas prices almost double what they were three years prior; and that part-time positions inflated the job market while full-time job growth was minimal. According to Schneider, the average consumer is not going to feel positive about the economy if they have to take on a second job. [2]
The number of Americans seeking jobs rose to 28.4% in July 2024, the highest since 2014, contributing to job anxieties. [9]
In November of 2024, Deputy Prime Minister Chrystia Freeland was ridiculed when she stated that the government's proposed temporary cut to the GST for certain goods was intended to combat Canada's "vibecession." [20]
In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster. There is no official definition of a recession, according to the IMF.
The United States has a highly developed mixed economy. It is the world's largest economy by nominal GDP and second largest by purchasing power parity (PPP). As of 2024, it has the world's sixth highest nominal GDP per capita and eighth highest GDP per capita by PPP). The U.S. accounted for 26% of the global economy in 2023 in nominal terms, and about 15.5% in PPP terms. The U.S. dollar is the currency of record most used in international transactions and is the world's reserve currency, backed by a large U.S. treasuries market, its role as the reference standard for the petrodollar system, and its linked eurodollar. Several countries use it as their official currency and in others it is the de facto currency. Since the end of World War II, the economy has achieved relatively steady growth, low unemployment and inflation, and rapid advances in technology.
In economics, inflation is a general increase in the prices of goods and services in an economy. This is usually measured using a consumer price index (CPI). When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of CPI inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. As prices faced by households do not all increase at the same rate, the consumer price index (CPI) is often used for this purpose.
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slowdown in the inflation rate; i.e., when inflation declines to a lower rate but is still positive.
The early 2000s recession was a major decline in economic activity which mainly occurred in developed countries. The recession affected the European Union during 2000 and 2001 and the United States from March to November 2001. The UK, Canada and Australia avoided the recession, while Russia, a nation that did not experience prosperity during the 1990s, began to recover from it. Japan's 1990s recession continued. A combination of the Dot Com Bubble collapse and the September 11th attacks lengthed and worsened the recession.
Growth Recession is a term in economics that refers to a situation where economic growth is slow, but not low enough to be a technical recession, yet unemployment still increases.
A soft landing in the business cycle is the process of an economy shifting from growth to slow-growth to potentially flat, as it approaches but avoids a recession. It is usually caused by government attempts to slow down inflation. The criteria for distinguishing between a hard and soft landing are numerous and subjective.
The Greenspan put was a monetary policy response to financial crises that Alan Greenspan, former chair of the Federal Reserve, exercised beginning with the crash of 1987. Successful in addressing various crises, it became controversial as it led to periods of extreme speculation led by Wall Street investment banks overusing the put's repurchase agreements and creating successive asset price bubbles. The banks so overused Greenspan's tools that their compromised solvency in the 2007–2008 financial crisis required Fed chair Ben Bernanke to use direct quantitative easing. The term Yellen put was used to refer to Fed chair Janet Yellen's policy of perpetual monetary looseness.
The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009. The scale and timing of the recession varied from country to country. At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression.
An economic recovery is the phase of the business cycle following a recession. The overall business outlook for an industry looks optimistic during the economic recovery phase.
Jerome Hayden "Jay" Powell is an American investment banker and lawyer serving since 2018 as the 16th chair of the Federal Reserve.
Ruchir Sharma is an author, fund manager and columnist for the Financial Times. He is the head of Rockefeller Capital Management's international business, and was an emerging markets investor at Morgan Stanley Investment Management.
In economics, secular stagnation is a condition when there is negligible or no economic growth in a market-based economy. In this context, the term secular means long-term, and is used in contrast to cyclical or short-term. It suggests a change of fundamental dynamics which would play out only in its own time. The concept was originally put forth by Alvin Hansen in 1938. According to The Economist, it was used to "describe what he feared was the fate of the American economy following the Great Depression of the early 1930s: a check to economic progress as investment opportunities were stunted by the closing of the frontier and the collapse of immigration". Warnings of impending secular stagnation have been issued after all deep recessions since the Great Depression, but the hypothesis has remained controversial.
The COVID-19 recession was a global economic recession caused by COVID-19 lockdowns. The recession began in most countries in February 2020. After a year of global economic slowdown that saw stagnation of economic growth and consumer activity, the COVID-19 lockdowns and other precautions taken in early 2020 drove the global economy into crisis. Within seven months, every advanced economy had fallen to recession.
The expression "everything bubble" refers to the correlated impact of monetary easing by the Federal Reserve on asset prices in most asset classes, namely equities, housing, bonds, many commodities, and even exotic assets such as cryptocurrencies and SPACs. The policy itself and the techniques of direct and indirect methods of quantitative easing used to execute it are sometimes referred to as the Fed put. Modern monetary theory advocates the use of such tools, even in non-crisis periods, to create economic growth through asset price inflation. The term "everything bubble" first came in use during the chair of Janet Yellen, but it is most associated with the subsequent chair of Jerome Powell, and the 2020–2021 period of the coronavirus pandemic.
Since World War II, the United States economy has performed significantly better on average under the administration of Democratic presidents than Republican presidents. The reasons for this are debated, and the observation applies to economic variables including job creation, GDP growth, stock market returns, personal income growth, and corporate profits. The unemployment rate has risen on average under Republican presidents, while it has fallen on average under Democratic presidents. Budget deficits relative to the size of the economy were lower on average for Democratic presidents. Ten of the eleven U.S. recessions between 1953 and 2020 began under Republican presidents. Of these, the most statistically significant differences are in real GDP growth, unemployment rate change, stock market annual return, and job creation rate.
The economic policy of the Joe Biden administration, colloquially known as Bidenomics, is characterized by relief measures and vaccination efforts to address the COVID-19 pandemic, investments in infrastructure, and strengthening the social safety net, funded by tax increases on higher-income individuals and corporations. Other goals include increasing the national minimum wage and expanding worker training, narrowing income inequality, expanding access to affordable healthcare, and forgiveness of student loan debt. The March 2021 enactment of the American Rescue Plan to provide relief from the economic impact of the COVID-19 pandemic was the first major element of the policy. Biden's Infrastructure Investment and Jobs Act was signed into law in November 2021 and contains about $550 billion in additional investment, to repair infrastructure like roads, bridges and water pipes and expand passenger rail and broadband. Biden signed two additional major pieces of longer-term economic legislation to boost semiconductor investments and public basic research, and expand green energy and health insurance subsidies.
Following the COVID-19 pandemic in 2020, a worldwide surge in inflation began in mid-2021 and lasted until mid-2022. Many countries saw their highest inflation rates in decades. It has been attributed to various causes, including pandemic-related economic dislocation, supply chain disruptions, the fiscal and monetary stimulus provided in 2020 and 2021 by governments and central banks around the world in response to the pandemic, and price gouging. Preexisting factors that may have contributed to the surge included housing shortages, climate impacts, and government budget deficits have also been cited as factors. Recovery in demand from the COVID-19 recession had, by 2021, revealed significant supply shortages across many business and consumer economic sectors.
Lindsay Alexandra Owens is an American economic sociologist and academic who serves as the executive director of the Groundwork Collaborative, a Washington, D.C.–based non-profit public policy think tank. Owens is best known for her academic research of economic recessions in the United States and outspoken public commentary of the role that corporate profiteering plays in inflation. She previously served as a fellow at the liberal think tank Roosevelt Institute.
Kyla Scanlon is an American financial content creator, educator, and author.
