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

A shopper carries several bags in Chicago’s Magnificent Mile shopping district 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 newest trends, “silent depression,” seeks to explain how essential expenses like housing, transportation, and food make up a growing share of the average American’s take-home pay. According to some TikTokers, it’s harder to get by today than it was during the worst economic period in this country’s history.

But economists strongly disagree.

“The whole idea of ​​TikTok being that life was better in 1923 than it is now is divorced from reality,” said Columbia Business School economics professor Brett House.

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

Even if you only look at the numbers, the country has continued to expand after the Covid-19 pandemic, surpassing previous recession forecasts.

Officially, the National Institute for Economic Research defines a recession as “a significant decline in economic activity that is spread throughout the economy and lasts for more than a few months.” In the last century, there have been more than a dozen recessions, some of which have lasted as long as a year and a half.

“This is hardly depression”

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

Depression is “a whole 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 it in 80-90 years.”

In fact, the latest quarterly gross domestic product report, which tracks the overall state of the economy, rose more than expected, while the Federal Reserve’s efforts to lower inflation have so far been successful, a rare feat in economic history.

In its latest economic projections, the central bank said it would cut interest rates in 2024 even as the economy grows, the desired path to a “soft landing” in which inflation returns to the Fed’s 2 percent target without causing a significant rise in unemployment.

“Of course the economy is slowing down and the labor market is cooling, but we are not in a recession,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.

“Inflation has hit the poor more than the rich”

But despite the nation’s economic status, many Americans struggle with the high prices of everyday items, and most have used up their savings and now rely on credit cards to make ends meet.

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

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The lowest-paid workers spend a larger portion of their income on necessities such as food, rent, and gas. Classes have also experienced higher-than-average inflation spikes.

“Inflation has hit the poor harder than the rich in terms of the share of real income lost, because it has been relatively higher in categories that make up a larger share of household budgets,” Philipson said.

The housing market weighs on emotions

Housing, in particular, has weighed on many Americans’ opinions of how the nation is doing overall, regardless of what other data says. According to the S&P CoreLogic Case-Shiller index, home prices nationwide have risen 6.1 percent year-to-date, far more than the average increase for an entire calendar year over the past 35 years.

Mortgage rates have come down, but are still over 7%, and there are still very few homes for sale.

This explains why Americans feel so bad about their own financial situation, even though the country is in good shape, House said. “Since home ownership is the largest investment decision most people will make in their lifetime, the real estate market is likely to dampen many Americans’ sentiments about the U.S. economy.”

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