Despite the U.S. economy remaining strong amidst inflation and high interest rates, a recent survey by Affirm found that 59% of Americans believe that the country is currently in a recession. This perception is fueled by higher costs and the struggle to make ends meet, with most respondents claiming that a recession started around 15 months ago and could extend until July 2025.
The ‘Goldilocks’ Economy
Gene Goldman, the chief investment officer at Cetera Financial Group, described the current state of the economy as a ‘Goldilocks’ scenario – not too hot, not too cold. Despite the ongoing impact of the Covid-19 pandemic, the country has managed to avoid the recessionary forecasts that were previously predicted. The National Bureau of Economic Research defines a recession as a significant decline in economic activity that lasts more than a few months. The last recession officially occurred in early 2020 when the economy came to a sudden halt.
Financial Struggles Among Americans
While the economy may be performing well on paper, many Americans are facing financial challenges due to soaring prices for everyday items. A significant number of individuals have depleted their savings and are now relying on credit cards to meet their basic needs. Vishal Kapoor, senior vice president of product at Affirm, highlighted that money is a top concern for consumers as they feel the impact of rising prices.
Economists have identified a growing disconnect between the actual state of the economy and how people perceive their financial situation. Joyce Chang, JPMorgan’s chair of global research, coined the term ‘vibecession’ to describe this phenomenon. Despite wealth creation being concentrated among homeowners and high-income individuals, a substantial portion of the population has been left behind. Rising rents, elevated borrowing costs, and stagnant wage growth are exacerbating financial disparities.
As consumers struggle to cope with increased prices and higher interest rates, there are clear signs of financial strain. A rising number of borrowers are falling behind on their monthly credit card payments, with approximately 9.1% of credit card balances transitioning into delinquency in the second quarter of 2024, as reported by the New York Fed.
The disparity between the perception of a recession and the actual economic performance underscores the need for a nuanced understanding of the financial challenges faced by different segments of the population. While headline figures may paint a rosy picture, the lived experiences of many Americans reveal a more complex and concerning reality. It is crucial for policymakers and financial institutions to address these disparities and provide support to those struggling to make ends meet in an increasingly challenging economic environment.
Leave a Reply