Contrary to the prevailing belief held by a majority of Americans, the U.S. economy has not succumbed to a recession. Despite facing challenges such as inflation and high interest rates, the economy has managed to remain robust. According to a survey conducted by Affirm in June, 59% of respondents falsely perceive the country to be in a recession. Most of them believe that the recession began around 15 months ago, in March of the previous year, and anticipate it to last until July of 2025.
Gene Goldman, the chief investment officer at Cetera Financial Group, describes the current state of the economy as a ‘Goldilocks’ scenario. The nation has displayed resilience post the Covid-19 pandemic, defying earlier predictions of a recession. The National Bureau of Economic Research officially defines a recession as a prolonged decline in economic activity that affects various sectors. The last recession occurred in early 2020 when the economy experienced a sudden halt. Despite numerous recessions in the past century, the U.S. has managed to bounce back each time.
However, a significant portion of the population continues to face financial challenges, irrespective of the country’s economic stability. Rising costs of essential commodities have led many Americans to deplete their savings and rely on credit cards to meet their expenses. Vishal Kapoor, senior vice president of product at Affirm, notes that consumers are grappling with higher prices and resorting to credit to bridge the financial gap.
Economists highlight the disconnect between the actual economic performance and people’s perception of their financial well-being. Joy Chang, JPMorgan’s chair of global research, labels this phenomenon as a “vibecession,” emphasizing the disparities in wealth distribution. While homeowners and the affluent have benefited from wealth accumulation, a significant portion of the population has been excluded from this growth. Lower-income households, in particular, have been disproportionately impacted by rising rents, escalating borrowing costs, and stagnant wage growth, widening the wealth gap significantly.
The strain on consumers is becoming increasingly evident as more individuals struggle to cope with escalating prices and heightened interest rates. The New York Fed’s report for the second quarter of 2024 highlighted a concerning trend – approximately 9.1% of credit card balances shifted into delinquency over the past year. This indicates a growing number of borrowers falling behind on their monthly payments, underscoring the financial challenges faced by a significant segment of the population.
While the U.S. economy may appear strong on the surface, a closer examination reveals underlying financial struggles experienced by many Americans. Addressing these challenges will require a concerted effort to bridge the wealth gap, alleviate financial burdens, and ensure economic inclusivity for all citizens.