How Bad IS The American Economy?

Dave:
Welcome, everyone, to On The Market. I am Dave Meyer, your host, joined today by Henry Washington. Henry, how often do you get your news from TikTok?

Henry:
I don’t get my news from TikTok very often, but I’d be lying if I didn’t say I get my news from Instagram, which probably means I get the news late.

Dave:
Yeah. Yeah, because it goes on TikTok first and then to Instagram.

Henry:
Yes. True.

Dave:
Well, TikTok is increasingly a lot of people’s primary choice for information, news, economics, all of that stuff. And there’s a new trend emerging on TikTok about the economy. And the idea is that the US is in a, quote, unquote, “silent depression.” And this is a really interesting idea and interesting topic that is gaining traction, and we wanted to dig into it.
So, in order to do that, we’ve invited on Jessica Dickler, who is a contributing writer and editor. She covers personal finance for CNBC, and she recently wrote an article and investigated this idea of a silent depression. And Henry and I are going to chat with Jessica about this trend and learn more about it. And then stick around because at the end of the episode, Henry and I are going to talk about our feelings about this and what we think about the silent depression, if it’s real, and what’s at the core of some of the economic sentiment that is spreading across the U.S. So, stick around, we’re going to get right into our interview with Jessica Dickler.
(singing)
Jessica, welcome to On The Market. Thank you for joining us.

Jessica:
Thank you for having me.

Dave:
You wrote an article called Is the U.S. In a Silent Depression? Economists Weigh in on Viral TikTok Theory. So, there’s a lot to unpack in that headline, but let’s just start with what this trend is and when did it start?

Jessica:
Okay. So, there’s this idea that’s been gaining a lot of traction on social media, particularly TikTok, about being in a silent depression. People are basically sharing their experiences that it’s harder today to get by, things cost a lot more, just going to the grocery store or buying gas eats up more of their take-home pay, and it’s less affordable now than it’s ever been in the past.

Dave:
Just at first glance, that seems mostly to surround the idea of inflation, that things are getting more expensive, or is there something else to this idea? Because when I hear depression, generally I think of something beyond just inflation.

Jessica:
Right. Well, that is the crux of it. I mean, the U.S. economy has remained remarkably strong coming out of the pandemic, even dodging these recessionary forecasts for months and months. But at the same time, we’ve seen inflation spike in this very short amount of time. And yes, housing, food, transportation, those all cost a lot more than they did just a few years ago. And that’s what’s really driving people crazy. So, when they compare what things cost today to just in their recent memory, it’s clear that things are a lot more expensive and they feel like that’s this silent depression that they’re talking about.

Henry:
Yeah. I was looking at some of the videos from the trend, and it’s tough seeing things that compare a lifestyle from the ’20s and ’30s to now, but what does grab you is when they talk about percentages, right? Like the percentage of their income that is allocated towards a car payment or a percentage of their income that’s allocated toward the housing expense. That percentage does seem … I mean, it is a lot higher. What’s the age group of people that are typically talking about this silent depression?

Jessica:
Yeah. This is really popular among young adults, particularly those starting out. Housing especially has weighed on them because it used to be that you would graduate from college, maybe rent an apartment, or even buy a home. That is so out of reach for many people today, especially with a starting income.
And if you don’t already own a home, then you don’t have the advantage of higher home prices to leverage into a new house purchase. So, you are looking at higher home prices, smaller supply, and of course, mortgage rates, which we’ve seen really jump in the last few years. I mean, they’ve come down and are now a little over 6%, but that’s still twice what they were three years ago.

Dave:
And are these videos catching on? Is this becoming a mainstream idea that we’re in a silent depression or how popular are they?

Jessica:
Well, yes and no. This idea has become very popular and on social media, these negative sentiments seem to resonate a little bit more. But there is also the reality that many economists say the country is doing remarkably well. We’ve seen GDP grow every quarter, which is generally a measure of the health of the economy, and people have jobs, and that’s really the number one determinant of how people are doing is whether they have a job or not. And the unemployment rate has held steady at 3.7%, which is near a historic low.
So, I mean, there is all this good data out there, but at the same time, these negative ideas, once you plant the seed, they tend to grow and that’s what’s happening.

Henry:
Where would you say … Because obviously you’ve covered this and you’ve covered other stories like this, so where would you say, if there is one, the disconnect between what’s happening now and what people are feeling towards what happened in the past in a real depression?

Jessica:
Yeah. I mean, I think the disconnect really comes down to the affordability crunch that we’re in right now, which is a very true thing. Even though the economy has been trucking along and the unemployment rate is low, and people generally have jobs if they want jobs. At the same time, it does cost a lot more to go to the grocery store, to travel, to buy a car. Young adults also have student loan payments that have resumed after a very long pause, and people got used to not paying those.
So yeah, I mean, in your take-home pay, there’s just not enough left over at the end of the month to feel good about your financial standing. And that’s what we’re seeing play out on social media.

Dave:
I think it’s important to note that there is some data that supports this, as Henry cited some of the housing statistics, but also just for a lot of the pandemic year, so 2020 up until basically about a year ago, we were seeing that inflation was outpacing wage growth. And when you adjust for inflation, that means that everyone’s, on average, spending power for the average American had been declining.
Now, that has reversed since April of 2023, and it’s now about 1% better for wage growth over inflation, but there’s still a long way to go in terms of making up for the years of inflation eroding spending power. So, there is some logic and math behind what this trend is talking about, but what do economists think about this? You’ve mentioned some things about GDP, I don’t know if you’ve spoken to any economists directly, but how do you think they might respond to this concept of a silent depression?

Jessica:
The economist that I spoke to for this article really balked at that idea, just saying that the idea that we’re in a silent depression is completely divorced from reality. Of course, in many ways the country is in a lot better shape than it was nearly 100 years ago. There are social safety nets, there’s a better quality of life. People have more equal opportunities. I mean, just from an economic standpoint, the math doesn’t really math on the silent depression concept, but that doesn’t quite capture the emotion of what it’s like today.
So, technically from the economic standpoint, a depression is really defined by how the economy is doing, and we’re just not seeing that play out in the numbers. So, we’ve only had one depression in this country’s history, which was the Great Depression, which spanned a decade, and unemployment hit about 25%. Things are nothing like that today. In many ways, we’re much better off.

Henry:
Yeah, I tend to agree with you and the economists. I think what people are so caught up in is that the basic human needs of shelter and food are more expensive and it makes it feel like a depression. But I think it’s like this, we’re getting these terms mixed up or confused with each other because what we have now that wasn’t available then, and you guys hit on it before, was availability of jobs. Right? People can find a job pretty easily right now if they want to. It may not be a job they love, but finding a job is a possibility. In the depression, that wasn’t a possibility for everybody. There just wasn’t the money to go around.
But also, convenience, right? With the advancements of technology, you can make money without a job now. You can make money on social media or selling digital products or just people’s ability to reach an audience and then monetize that audience is far more available now than it wasn’t before. So, you don’t actually even have to go get a job. And so yes, you have to go make more money now to be able to afford the necessities and that is, or could be seen as a problem, but the opportunity is far greater.

Jessica:
Yeah, definitely. And so many people are taking advantage of that. Even like you said, you can pick up a side gig on your phone or sell things out of your home. It’s never been easier to do that, and it’s a great way to supplement your income. That’s the reality that a lot of people are facing that maybe they need a job and a side gig to make it work.

Dave:
I think my general feeling about this is that I do have empathy for anyone who’s struggling to afford basic necessities. Housing is more expensive. You cannot argue against that. I think the issue I have is that the term is just wrong. It has nothing to do with a depression, and it’s just a different branding of inflation. What’s being described is the detriments of inflation.
When you talk about depression, Jessica, you gave a definition of it. Yeah, is it a broad decline in economic output for several years across many industries? That is not happening by any measurement. And so, are there economic problems in the U.S.? Absolutely. But calling it a depression, I think, is a bad name for it.

Jessica:
Yeah, I agree. But except for the fact that that’s what caught people’s eye on social media, and a lot of it does come back to that. These ideas really pick up steam because they’re catchy and interesting, and we’re seeing that happen.

Dave:
That’s true. I guess, I think it’s a bad name, but for the people who created this content, they probably think it is a very good name because they probably got a lot of views for it.

Jessica:
Exactly.

Dave:
Jessica, are there any other trends about the economy you’ve noticed going around on social media?

Jessica:
I mean, there’ve been so many ideas about economic conditions on social media. It’s a hot topic these days, which makes my job a little more interesting. But I mean, we recently were all abuzz about girl math and the idea of you have to rationalize any expensive purchase by thinking about the cost per wear.
I mean, all this relates back to affordability and the economy and how people are doing and they want to buy things. And of course, consumers have been buying things, and that has really helped the momentum of the economy overall. But they’re also rationalizing and trying to justify purchases that maybe they can’t afford, and sometimes leaning a little bit too much on credit card debt. I mean, it’s just very interesting to see these ideas take hold to prop up how people are doing these days.

Dave:
Yeah, it’s super interesting. I think it just reflects some cultural shifts in how people think about the economy and spending in general. And I’m personally just very curious to see how it continues because we hear from a lot of sources that credit card debt is up and a lot of the excess savings from the pandemic has been depleted. But when you look at consumer spending and retail sales, they’re still pretty high. And so, at some point, it feels like something needs to give, but surprisingly that hasn’t happened yet.

Jessica:
Yeah, exactly. And I do think we’ll start to see that cool a little bit in 2024. I mean, the economist that I talked to also said that that level of spending just isn’t really sustainable and things will start to calm down a little bit.
I heard a new term that caught my eye, loud budgeting, where you just say no and explain why you’re not going to buy something, even though you want to buy it, but it just doesn’t fit in the budget and you’re going to talk yourself out of it.

Henry:
I can see people screaming in stores, “I will not buy this because rent is due in three days.”

Dave:
Yeah.

Jessica:
Yep.

Henry:
So, because you cover a lot of these financial trends and topics in terms of social media and what’s going on in the economy, how do you feel like both the media and social media have played into people’s concerns around the economy?

Jessica:
Well, I think some of these ideas without the real data and information behind them can be detrimental. I mean, why do people feel bad about an economy that’s doing well? I mean, you really need to look at the whole picture and not just what people are sharing on social media. And at the same time, we’re also seeing these lavish lifestyles, which also doesn’t help make people feel very good about how they’re doing, when they can’t afford those types of purchases or trips or whatever it is.
So, I think that in many ways it can be harmful, but it also is where we are today, and people get their news from social media and their information. It can be great to share your experiences and also raise the curtain if you’re feeling disheartened about your economic standing. I mean, it doesn’t have to be a secret, but at the same time, I think it needs to be balanced with some good data on what the reality is in this country and where we stand.

Henry:
Yeah, I agree. I think when I hear us talking about this, it gets me thinking back to when I was coming out of college and when I had my first job, I wasn’t making a ton of money. I think my first job paid me just under $30,000 a year, and there were plenty of trips that I couldn’t go on with my friends, that I had to say no to. There were plenty of budgeting decisions I had to make around what I was going to buy at the grocery store because of the expenses I knew that I had coming up. I missed out on what felt like a lot at the time.
And I guess the point I’m trying to make is none of this is really new. I think the new part is everyone shares all of their successes on social media and people feel like they want to be able to do that, and they can’t. No one’s on social media saying, “I’m at the grocery store and I can’t buy eggs because I need to pay my light bill.” That’s not making it on social media. And so, I think a lot of it is people’s need or want to be able to show the highlight reel and they can’t, but it doesn’t mean that they’re missing out on too much.

Jessica:
Yeah. I mean, I agree. I think that is the very common experience for young adults just starting out. It certainly was my experience too, but what I think is new is that there are these extremes that we’re also seeing exposed, where people just have access to more wealth, more opportunity, and it makes the regular rest of us feel like we’re even more deprived because maybe we can’t do all of those amazing things.

Henry:
So, that’s what it is, Dave. The Great Depression is just we are feeling depressed. It doesn’t mean there’s an actual depression.

Dave:
Yeah. Maybe I’ve been misinterpreting the language of this all along. It’s more an emotional depression than an economic depression.

Henry:
Yeah. Correct.

Dave:
Well, Jessica, thank you so much for joining us and sharing this information about this new trend with us. We really appreciate your time.

Jessica:
Thank you for having me.

Dave:
Henry, what do you make of this silent depression now that we’ve learned a little bit more about it from Jessica?

Henry:
It’s one of those things where my feelings are torn about it. Right? I understand that things are more expensive. I do. They are. I mean, housing is expensive. It is going to take the majority of your pay to pay for a housing expense if you want to live on your own. Right? There are some ways obviously, that people are supplementing that by getting roommates or house hacking or all of those other things. Yeah, I mean, groceries are expensive. They are extremely expensive, and they’re even more expensive if you actually want to eat healthy.

Dave:
Yeah, that’s the real tax, or [inaudible 00:18:37].

Henry:
Right. But, the big but is, the economy’s doing well and there are opportunities out there for people, lots of opportunities out there for people, not just for the job that they have, but to make additional money, have a side gig. It’s just the convenience is much better. It’s easier now than it’s ever been to make income.
And I think one of the things that we didn’t touch on was that, yes, the inflation is a thing, but we’re starting to see companies start to pay higher wages for jobs and roles now, so that people can combat some of those affordability issues. And so, I think even that’s starting to increase, and hopefully we’ll get to a point where we can lower the percentage of what some of these things cost.

Dave:
Can I go on a rant for three minutes? I need to talk about this with you.

Henry:
I would love that. I would love that.

Dave:
Okay.

Henry:
Nothing would make me happier.

Dave:
My wife says, I get in Larry David mode where I’m just complaining about these little inane details about things. If you watch Curb Your Enthusiasm.

Henry:
Oh, I know Larry David.

Dave:
Yeah. So anyway, I think the thing that annoys me about this trend is that it’s just mislabeled. It’s using one economic term that describes a specific thing to describe a totally different thing. A depression and inflation are totally different things. And as you said, Henry, inflation is real and it has evaporated some spending power for people. But when you look at the economy as a whole, by almost any metric you can find, it is growing at a very significant pace. Like GDP, which is the broadest measure of the US economy, it stands for gross domestic product, over the last three years has gone up somewhere around 22%. We don’t know exactly because 2023 numbers aren’t out yet. During the Great Depression, it went down 29%. So, you’re talking about growth of 20% versus decline of 29%. Not to mention all the things about convenience that Henry said.
I watched some of these videos too, and some were like, “This might be the worst U.S. economy ever.” That is just patently ridiculous and just doesn’t look at anything like at the history of the U.S. That said, there is economic challenges with the U.S. right now. And I think the reason it annoys me is because I think they’re just missing the main points about why they’re struggling. And GDP is growing. So, when you look at the big economic picture, the pie is growing. That does not mean that everyone feels the growing of that pie equally.
And so, I think that’s what people are actually frustrated about is that certain groups of people, either wealthy people, but I also want to call out older people, have absorbed a lot more of the wealth gains of the last 15 years than younger people. And I think that’s something that should be talked about, but that doesn’t mean that we’re in a depression. I think it just means that there are these big generational divides and how much wealth is being created. Just as an example, I pulled this up when we were talking. If you look at by age 35, 62% of boomers owned homes compared to millennials, 49%. About 14% of millennials right now have negative net worth. At the same age, baby boomers were 8%. So, you can see there are differences, and that is something that is worth talking about, but that doesn’t mean we’re a depression. It’s a totally different thing. It’s a totally different word. That’s the end of my rant.

Henry:
Mic dropped.

Dave:
I’m sorry. I had to say it.

Henry:
No, it needs to be said.

Dave:
Well, I don’t expect you to respond to that.

Henry:
No. My response is every time I see somebody post one of these videos, I go to their feed and I start scrolling backwards and I can always see a trip or a cool car. It’s like, there’s money’s being spent.

Dave:
Yeah. It is a trendy word. I don’t know. I guess what frustrates me is let’s talk about the real economic issues instead of just mislabeling them. But now I’m just complaining like an old man about social media.

Henry:
All right, boomer Dave, let’s move on.

Dave:
Yeah, exactly. Yeah, I’ve gone from millennial to boomer in the last five minutes. All right, well, I think that’s good thing to get out of here on.
Well, Henry, thank you for your thoughtful and good questions here. Appreciate the conversation. And thank you all for listening. We appreciate you and we’ll see you for the next episode of On The Market.
On The Market was created by me, Dave Meyer, and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico Content. And we want to extend a big thank you to everyone at BiggerPockets for making this show possible.