When you walk into any restaurant in the American Midwest on a weekday morning, the talk at the counter usually revolves around the same topics: pricing, rent, and the idea that money is disappearing more quickly than it used to. GDP growth is not being discussed. They are discussing the fact that their landlord recently handed them another notice and that a dozen eggs now cost almost three times as much as they did four years ago. From their vantage point, the economy is not doing well. The administration continues to claim otherwise, based on a different set of statistics. They are both describing actual things. They simply have entirely different perspectives.
The overall output of an economy is measured by the gross domestic product, which is the sum of all the dollars spent by firms, governments, and consumers. Economists refer to an increase in that number as expansion. They refer to it as a recession when it declines for two quarters in a row. By that measure, the United States has technically avoided recession for the majority of the post-pandemic period, with GDP continuing to increase positively despite a decline in consumer mood. The headline unemployment rate has remained low. For a considerable amount of time, corporate earnings were strong. The scorecard appeared respectable on paper. The White House continued to cite these figures for a reason. They weren’t incorrect.GDP calculates the size of the economy. It doesn’t gauge how that economy feels to a grocery shopper.
However, assessing an economy from 30,000 feet misses what’s going on at street level. Even after declining from its peak in 2022, inflation did not go back. For the most part, prices that soared—for food, utilities, and insurance—stayed elevated. That has a terrible cumulative effect that is not captured by a falling rate of inflation. Because the harm has already been done, you might have slowing inflation and still be significantly worse off than you were three years ago. This divergence is well understood among economists. The public lost faith in the official narrative in part because many policymakers miscommunicate it.
A few years ago, the word “vibecession” began to circulate in economic circles. It was partially used as a dismissive, implying that the pessimism was unreasonable in light of the statistics. However, it’s difficult to ignore the fact that those experiencing the worst weren’t dreaming. Although wage growth eventually accelerated, it lagged below inflation for many years. Employees silently saw their real compensation decline as their nominal pay increased. No GDP report could alleviate the financial tiredness that resulted from that lag, which was essentially running on empty. This was consistently reflected in sentiment polls, and economists who anticipated that the positive figures would eventually change the attitude continued to be shocked when they did not.
Everything was sharper because of housing. The US housing market was truly unrecognizable between 2020 and 2024, and for the majority of households, housing is where the budget lives or dies. The median price of a property increased by around 40%. Rents came next. Mortgages were significantly more expensive as a result of the interest rate increases intended to reduce inflation, completely excluding many first-time buyers from the market and doing nothing to lower rents. Observing the Federal Reserve’s medication cure the headline figure while keeping the patient bedridden has a certain cruel irony.
Speaking with working professionals in their thirties and forties gives me the impression that a certain set of presumptions about how adulthood was meant to function—saving, purchasing, and establishing stability—has just been subtly canceled.
Who is correct, then? both sides, if the question is honestly posed. Data on employment and GDP are accurate, well-constructed indicators of overall economic activity. They let you know if the nation is producing more or less than it did previously. They don’t indicate anything about the producers’ ability to support themselves. Rent, groceries, and medical expenses are examples of personal financial realities that work at a completely different resolution than those found in national data. Not believing the data is the error. It makes the assumption that a single collection of numbers captures the essence of the situation. Although it’s still unclear when the gap between the official and lived economies will truly close, the only accurate approach to understand what’s going on is to follow both data at the same time.
