A shopper carries several bags in the Magnificent Mile shopping district in Chicago on December 2, 2023.
Taylor Glascock | Bloomberg | Getty Images
The U.S. economy has remained remarkably strong, but affordability is worse than ever, some social media users say, even compared to the Great Depression.
One of TikTok's latest trends, dubbed the “silent depression,” aims to explain how essential expenses like housing, transportation and groceries are making up an increasing share of the average American's take-home income. According to some TikTokers, it's harder to make ends meet today than it was during the worst economic period in this country's history.
But economists strongly disagree with this statement.
“Any idea from TikTok that life was better in 1923 than it is today is not reality,” said Brett House, an economics professor at Columbia Business School.
More from Personal Finance:
62% of Americans live paycheck to paycheck
Shoppers use “girl math” to justify luxury purchases
Even high earners think they are “not rich yet”
Compared to 100 years ago, “today life expectancy is much higher, the quality of life is much better, the opportunities to develop one's potential are much greater, human rights are more respected and access to information and education is much broader,” said House.
Even just looking at the numbers, the country has continued to grow since the Covid-19 pandemic, avoiding previous recession predictions.
Officially, the National Bureau of Economic Research defines a recession as “a significant decline in economic activity that extends 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 up to a year and a half.
The only depression the U.S. ever experienced in industrial times spanned a decade, from the stock market crash of 1929 to 1939, when the U.S. began mobilizing for World War II.
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, rose more than expected, while the Federal Reserve's efforts to reduce inflation have so far been successful, a rare feat in economic history.
The central bank has signaled in its latest economic forecasts that it will cut interest rates in 2024, even if the economy is still growing. This would be the intended path to a “soft landing,” in which inflation returns to the Fed’s 2 percent target without causing a significant increase in unemployment.
“Of course the economy is slowing and the job market is cooling, but we are not in a depression,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.
But regardless of the country's economic situation, many Americans are struggling with skyrocketing prices for everyday items, and most have depleted their savings and now rely on credit cards to make ends meet.
Lower-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.
The lowest-paid workers spend a larger share of their income on essentials like food, rent and gasoline, categories that have also seen above-average spikes in inflation.
“As measured by the share of real income lost, inflation has hit the poor harder than the rich because it has been relatively higher in the categories that make up a larger share of household budgets,” Philipson said.
Housing in particular has influenced many Americans' opinions about how the country as a whole is doing, regardless of what other data says. According to the S&P CoreLogic Case-Shiller Index, home prices nationwide have risen 6.1% year-to-date, much higher than the median full calendar year increase over the past 35 years.
Mortgage rates have declined but are still above 7% and the supply of homes for sale remains very low.
That explains why Americans feel so bad about their own financial situation, even when the country is in good shape, House said. “Because homeownership is the largest investment decision most people make in their lives, the housing market is likely dampening many Americans’ feelings about the U.S. economy.”
Subscribe to CNBC on YouTube.
Comments are closed.