Getty Images; Jenny Chang-Rodriguez/BI
I’ve spent the past couple of years gently correcting the people in my life that, despite their frustrations with the economy, we are not in a recession. Yes, prices are higher, but workers’ pay is, too — and the sticker shock has not stopped consumers from spending a ton. Blue-collar workers in particular have seen solid gains, and as much as there’s chatter about a white-collar recession, the unemployment rate for college-educated workers remains low.
But lately I’ve had a harder time painting such a rosy picture. The economy’s not bad, but the overall situation is increasingly frustrating. As much as the inflation rate has fallen, 2019 prices aren’t coming back. The Federal Reserve is going to start to cut interest rates soon and deliver some relief, but if you’re considering buying a new house or car, you’re probably still better off waiting. The same goes for switching jobs — given the state of the labor market, it’s best to stay where you are, especially for the white-collar crowd.
For months and months it’s felt like the other shoe on the economy is about to drop. I mean, in October 2022, Bloomberg’s economic model was saying there was a 100% chance of a recession over the next year. That recession didn’t happen, but the vibecession did. Now, economic indicators aren’t flashing red, but they’re not flashing green either. We’re in wait-and-see mode.
“There’s a little bit of collective breath-holding,” said Allison Shrivastava, an associate economist at Indeed. “Are we going to stick this landing, or are things going to continue in a downward trend? We expected there to be a cooling labor market — that’s kind of the goal — and it’s always just, you know, how cool?”
The economic uncertainty is exhausting, and it’s being compounded by the coming election.
“We have a lot of consumers who are telling us they’re reserving judgment about what’s happening until the election is resolved,” said Joanne Hsu, the director of consumer surveys at the University of Michigan. “They’re saying there’s just no way to tell.”
“It’s so over” has become a bit of an annoying internet trope as of late. It signals a downward turn of events, things not going your way — the opposite of “we’re so back,” when things are on the upswing. That being said, when it comes to the labor market … it is, in fact, so over. The jobs boom the US was seeing in 2021 and 2022 is well in the past, and there are clear signs of slowing.
The economy added 142,000 jobs in August, and the unemployment rate ticked down slightly, to 4.2%. That’s an improvement over July’s 4.3% unemployment rate, but overall, the jobs market in the US is cooling off. Job openings in July were back at 2021 levels. The rates of hires and quits ticked up for the month, but they’re back at pre-pandemic levels, though layoffs remain low. What that means is that if you have a job, you’re likely to be able to hold on to it, but if you want to move around or are unemployed and looking for work, you might be in for a tough time.
Much of this is to be expected — part of the reason the Fed raised interest rates was to slow down the economy, including the labor market. It’s not reasonable to expect the economy to add jobs at the clip it was in the immediate wake of the pandemic.
“If you imagine a labor market like a bathtub, the bathtub is full,” said Dana Peterson, the chief economist at the Conference Board. “So you don’t need to run the water, don’t need to run the faucet hard anymore.”
Still, the end of a party is never particularly fun. Now, even just the knowledge that the labor market is on shakier ground is anxiety-inducing — average monthly job gains are dropping consistently, and there’s no telling what will make that drop stop. Some of the story varies by sector — if you work in tech, it might be a trickier time to find a job than if you were looking for something in healthcare or construction.
Even just the knowledge that the labor market is on shakier ground is anxiety-inducing.
Some workers feel like they missed the boat on all the job hopping over the past couple of years, and now it seems like the opportunity to participate has passed. Despite the strong labor market, they’re sending endless résumés into the ether without getting any bites, and they don’t understand why. Jaime-Alexis Fowler, the founder of Empower Work, a nonprofit that provides a text hotline for workers, said she’d heard a lot of frustration from workers searching for good jobs and being unable to find them. That’s led some of them to fall for scams and has fostered animosity among those who work in person but want to work from home.
“People were feeling there was just this dissonance between their direct experience and what they were hearing was happening with the economy,” she said. “And so it felt like there was something wrong with them. ‘I’m not hearing back.'”
For a lot of people, the current environment just feels a little blech. There are so many unknowns that make it hard to figure out what’s the right move.
Do I buy the house now and pay a higher mortgage rate, or do I wait and risk home prices getting even higher six months from now? Do I try to leave this stupid job, or do I stick it out because at least maybe the higher-ups will feel a slight pang before laying me off? Do I hire someone new at my small business or just keep staffing as is? Is this the stock-market dip I should buy, or should I continue to hold out because The Big One is finally coming? Or maybe I should just buy and sell at random, because everything is kind of a casino anyway, right?
Hsu said consumer sentiment is better than it was at its mid-2022 low, but it’s still below its historical average. There are also some serious disparities in how different groups view the economy.
“People in the lower part of the income distribution don’t actually feel all that much better than they did two years ago,” Hsu said, “whereas higher-income and wealthier people feel much, much better.”
Even if the labor market isn’t as awesome for them, those at the higher end of the income distribution are enjoying the stock market’s recent gains and the appreciation of their home values. Those on the lower end, on the other hand, aren’t really benefiting from what’s happening in the markets, and higher housing prices are making them poorer, because they’re renters.
Productivity growth is a marathon. Vibes are a sprint.
Some economic trends that are positive in the long term aren’t delivering instant effects. Michael Madowitz, the principal economist at the Roosevelt Institute, a progressive think tank, pointed out that worker productivity — an economic measure looking at how much output workers create in the hours they’re on the job — is something that gets economic nerds excited, but not so much the workers doing the producing. “Productivity growth is a marathon,” he said. “Vibes are a sprint.”
The uncertainty around the outcome of the 2024 election really does hang over everything. Hsu said consumers were incorporating who they expect to win the election into their views of the economy. If X candidate comes out ahead in November, some will say that things will be great, and others will say that things will be terrible; if Y comes out ahead, they’ll flip. The race is very tight, adding to the uncertainty and unease around the economy. Even though the election won’t immediately change the country’s economic course, it will change how people feel about it.
“With interest rates falling and getting past the election, people probably will feel better,” Peterson said. (As long as we don’t have a 2020-esque situation where we don’t know the outcome for days and one of the candidates refuses to accept the results.)
Not to sound like a broken record here, but the economy is decent. The labor market is OK, if slipping a little. Consumer spending is strong, and incomes are higher than they were before the pandemic. GDP growth is probably slowing, but it doesn’t seem like it will fall into recession territory anytime soon. There are reasons for concern — pandemic savings have dried up, and credit-card delinquencies are rising — but there’s no need to declare disaster yet.
Things are just kind of slowing down and stalling out, and after a few years of strong momentum, that’s making people nervous. Even a slight deterioration is uncomfortable for everybody, and for some people, it can feel dire. We’re stuck in limbo, and that limbo is just not a fun place to be.
Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.
