Is the US in a silent depression? Economists weigh in on TikTok’s viral theory

A shopper carries several bags in Chicago’s Magnificent Mile shopping district on Dec. 2, 2023.

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The US economy has remained remarkably strong but affordability is worse than ever, some social media users said, even compared to The Great Depression.

One of TikTok’s latest trends, the creator of the “silent depression,” aims to explain how basic costs such as housing, transportation and food cause an increase in the average American’s salary. It’s harder to make ends meet now than it was during the worst economic times in this country’s history, according to some TikTokers.

But economists strongly disagree.

“Any notion from TikTok that life was better in 1923 than it is today is divorced from reality,” said Columbia Business School economics professor Brett House.

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Compared to 100 years ago, “today, life expectancy is longer, the quality of life is better, the opportunities to realize one’s potential are greater, human rights are more respected and access to information and education is widely expanded,” House said.

Even just looking at the numbers, the country has continued to expand since the Covid-19 pandemic, avoiding earlier recessionary forecasts.

Officially, the National Bureau of Economic Research defines a recession as “a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.” There have been more than a dozen recessions in the last century, some lasting as long as a year and a half.

‘It’s not a depression’

The only depression the US experienced during the industrial era lasted a decade, from the stock market crash of 1929 to 1939, when the US began to mobilize for World War II.

A depression is a “completely different order of magnitude,” Susan Houseman, director of research 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, rose more than expected, as the Federal Reserve’s efforts to lower inflation were successful, a rare feat in economic history.

The central bank signaled in its latest economic projection that it will cut interest rates in 2024 even as the economy continues to grow, which would be the sought-after path to a “soft landing,” where inflation would return to the Fed’s 2% target without causing a significant increase in unemployment.

“Sure, the economy is slowing, and the job market is cooling, but we’re not in a depression,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.

‘Inflation hits the poor harder than the rich’

But regardless of the nation’s economic status, many Americans are struggling in the face of high prices for everyday items, and most have depleted their savings and are now leaning on credit cards to make ends meet. needs.

Low-income families have been particularly hard hit, said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chairman of the White House Council of Economic Advisers.

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The lowest-paid workers spend more of their income on necessities like food, rent and gas, categories that have also experienced above-average inflation increases.

“Inflation hits the poor more than the rich, in terms of the share of real income lost, because it is relatively higher for categories that make up a larger share of household budgets,” said Philipson.

The housing market is weighing on sentiment

Housing, in particular, has weighed on the opinion of many Americans about how the country, in general, is faring regardless of what other data says. Year to date, home prices nationwide are up 6.1%, more than the median full calendar year increase over the past 35 years, according to the S&P CoreLogic Case-Shiller Index.

Mortgage rates have retreated but are still above 7%, and there remains a very low supply of homes for sale.

That explains why Americans feel bad about their own financial standing, even when the country is in good shape, House said. “Because owning a home is the largest investment decision most people make in their lifetime, the real estate market is likely to dampen the sentiment of many Americans about the US economy.”

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