A shopper carries several bags in Chicago’s Magnificent Mile shopping district on December 2, 2023.
Taylor Glasscock | Bloomberg | getty images
Some social media users say that the US economy remains remarkably strong, but affordability is worse than ever, even when compared to the Great Depression.
One of TikTok’s latest trends, called “Silent Depression,” aims to highlight how major expenses like housing, transportation, and food are responsible for an increasing share of the average American’s take-home pay. According to some TikTokers, it’s harder to make ends meet today than during the worst economic times in this country’s history.
But economists completely disagree with this.
“Any notion from TikTok that life in 1923 was better than it is now is divorced from reality,” said Brett House, an economics professor at Columbia Business School.
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Compared with 100 years ago, “today, life expectancies are much longer, the quality of life is much better, opportunities to realize one’s potential are much greater, human rights are more widely respected and access to information and education is Access has been widely expanded,” House said.
Even when looking at just the numbers, the country has continued to expand since the Covid-19 pandemic, defying earlier recession forecasts.
Officially, the National Bureau of Economic Research defines a recession as “a significant decline in economic activity that extends throughout the economy and lasts more than a few months.” There have been more than a dozen recessions in the last century, some of which lasted for a year and a half.
‘It’s hardly depression’
From the stock market crash of 1929 to 1939, when the US began mobilizing for World War II, the US experienced the only recession in a decade of industrial time.
Depression is “a completely different order of magnitude,” Susan Houseman, research director at the WE Upjohn Institute for Employment Research, told CNBC. “We haven’t seen anything like this in 80 to 90 years.”
In fact, the latest quarterly gross domestic product report, which tracks the overall health of the economy, grew more than expected, while the Federal Reserve’s efforts to reduce inflation have been successful so far, a rare feat in economic history. Is.
The central bank indicated in its latest economic projections that it would cut interest rates in 2024 even if the economy is still growing, which would be the desired path to a “soft landing”, where inflation falls without any significant reason for the Fed’s 2 % returns to target. Increase in unemployment.
“Sure, the economy is slowing, and the job market is cooling, but we’re not in a recession,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.
‘Inflation is hitting the poor more than the rich’
But regardless of the country’s economic condition, many Americans are struggling due to skyrocketing prices of everyday items, and most have exhausted their savings and now rely on credit cards to make ends meet.
Low-income families have been particularly hard hit, said Tomas Phillipson, a professor of public policy studies at the University of Chicago and former acting chairman of the White House Council of Economic Advisers.
The lowest-paid workers spend more of their income on necessities like food, rent and gas, categories that have seen higher-than-average increases in inflation.
“In terms of the share of real income loss, inflation is hitting the poor more than the rich, because it is relatively greater for categories that make up a larger share of the household budget,” Phillipson said.
Housing market depends on sentiment
Housing, in particular, has influenced many Americans’ opinions of how the nation is performing overall, despite what other data says. Year to date, home prices nationally are up 6.1%, according to the S&P CoreLogic Case-Shiller Index, which is far greater than the average full calendar year increase over the past 35 years.
Mortgage rates have bounced back but are still above 7%, and the supply of homes for sale remains very low.
This explains why Americans feel so bad about their financial situation, House said, even when the country is in good shape. “Since homeownership is the largest investment decision most people will make in their lifetime, the real estate market is undermining many Americans’ sentiment about the U.S. economy.”
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