The notion of a ‘silent depression’ in the United States, a theory gaining traction on TikTok, has been refuted by economists.
The theory suggests that the cost of essential expenses like housing, transportation, and food consumes a larger portion of the average American’s income today than during The Great Depression.
However, experts in the field strongly disagree with this assessment.
Economic Realities vs. Social Media Claims
Brett House, a professor of economics at Columbia Business School, categorically denies the claims circulating on TikTok.
“Any notion from TikTok that life was better in 1923 than it is now is divorced from reality,” House stated.
He emphasizes the improvements over the last century in life expectancy, quality of life, opportunities for potential realization, respect for human rights, and access to information and education.
Economic Growth Post-Covid-19
Despite concerns, the U.S. economy has shown resilience and expansion since the COVID-19 pandemic, contrary to some recessionary predictions.
The National Bureau of Economic Research defines a recession as a significant decline in economic activity across the economy lasting more than a few months.
The U.S. has experienced over a dozen recessions in the past century, but none have equaled the scale of the Great Depression.
Defining Economic Terms
Susan Houseman, Research Director at the W.E. Upjohn Institute for Employment Research, explains the distinction between a recession and a depression.
“A depression is a totally different order of magnitude,” she told CNBC, noting that the U.S. hasn’t seen anything akin to a depression in 80 to 90 years.
Economic Indicators and Federal Reserve Actions
Recent economic reports, such as the quarterly gross domestic product, have shown better-than-expected results.
The Federal Reserve’s efforts in managing inflation have been successful, an uncommon achievement in economic history.
The central bank also plans to reduce interest rates in 2024 while continuing economic growth, aiming for a “soft landing.”
Economic Slowdown vs. Depression
Sung Won Sohn, a professor of finance and economics at Loyola Marymount University, acknowledges the economic slowdown but rejects the notion of a depression.
“To be sure, the economy is slowing, and the job market is cooling, but we are not in a depression,” he said.
The current unemployment rate of 3.7% and the ratio of job openings to available workers further refute the depression claim.
Inflation’s Impact on Different Income Groups
Despite the overall economic strength, many Americans, especially those with lower incomes, are struggling with high prices for everyday items.
Tomas Philipson, a professor at the University of Chicago, notes that inflation has disproportionately affected the poor, with lower-income groups spending more on necessities that have seen higher inflation rates.
Housing Market and Public Sentiment
The housing market has been a significant factor in shaping Americans’ perceptions of the economy.
Home prices have risen notably, with mortgage rates above 7% and a low supply of homes for sale.
This scenario impacts how Americans feel about their financial status, even if the broader economy is performing well, as noted by House.
In summary, while certain social media narratives depict a grim economic picture, economists provide a contrasting view, emphasizing the U.S. economy’s resilience and growth, albeit acknowledging the challenges faced by specific income groups.