The US economy keeps growing, but the vibes are still off: Morning Brief

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The recession many feared would befall the US economy still isn't here.

But a "vibecession" continues to linger.

Coined by author and financial educator Kyla Scanlon in a June 2022 Substack post, the "vibecession" was defined as "a period of temporary vibe decline where economic data such as trade and industrial activity are relatively okayish."

On Tuesday, Yahoo Finance caught up with Scanlon to see where we are in the vibecession cycle, and it seems we're still in it — for now.

"We're moving forward," Scanlon said. "We're getting out of it. But real wages have been relatively stagnant. People aren't feeling good about their economic situation because inflation has eaten away their wages."

As inflation surged in 2022, it seemed likely the vibes would eventually take the economy down with them. And yet here we are.

Inflation data set for release on Wednesday is expected to show consumer prices rose just 3.1% against last year in June — down from the 41-year high of 9.1% reached in June 2022. Excluding food and energy, however, inflation is still closer to 5%.

Now, by some measures, Americans are feeling good.

We're traveling all over the place, with TSA traffic data surpassing pre-pandemic records. Retail sales unexpectedly rose in May, showing people's willingness to spend. Even if hiring is slowing, most Americans who want jobs have them.

But there are plenty of measures that show a popular malaise. One of them is the closely watched University of Michigan sentiment index, which remains about 30% below where it stood pre-pandemic. And one of the biggest reasons why is that we're paying more for stuff.

Though even on this measure, both the so-called "hard data" like CPI and the "soft data" like Michigan's survey are showing signs of improvement.

"Year-ahead inflation expectations receded for the second consecutive month, falling to 3.3% in June from 4.2% in May. The current reading is the lowest since March 2021," Joanne Hsu, director of the University of Michigan's survey of consumers said last month.

Still, for Gen Z-ers like Scanlon who grew up during the 2008 financial crisis and entered the workforce into a pandemic, economic priorities have been reoriented.

"The prevailing work culture, defined by baby boomers and Gen X, is already outmoded in being able to deliver the freedom Gen Z seeks, and now it's being further challenged," Scanlon wrote this week. "We're entering a vast unknown with artificial intelligence and the continued gigification of the economy, while we're still dealing with the pandemic overhang of hybrid and remote jobs."

When it comes to work "we kind of have a passion crisis," she told Yahoo Finance, "where it's super difficult to figure out what you truly care about because you have to go on a certain path in order to make money to stay alive."

Recession or no recession, that's an existential puzzle that's not easy to solve.

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