There is no 'vibecession'

Daily Data: The witless masses are not so witless when it comes to their financial affairs

In today’s dispatch:

• experiencing the end of a tailwind

• spending is growing, but slowing

• wages are growing, but slowing (and, in some places, shrinking)

• ‘concert fatigue’ or ‘can’t afford it, fatigue’?

• store brands > name brands

• not-so-hidden burden of costlier services right there in your morning coffee

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There is no ‘vibecession’

There’s an annoying theory going around (again) that the reason regular people are pessimistic about the economy is because of “vibes.”

Really, they have no reason to be pessimistic—it’s just that the mood is off (so the theory goes).

The theory generally circulates among the concerned culterati for the reelection of President Biden, and it’s a way of saying “it’s the media’s fault for falsely giving the witless hoi polloi the impression that the economy is anything but awesome.”

Proponents of the theory will point to various things like GDP growth, unemployment, wage growth and asset appreciation as evidence that the economy is, in fact, awesome, and therefore the only possible explanation for pessimism is confusion or error (and the only possible explanation for that is “the media,” which curiously, is not them).

I find this theory annoying not because it’s so transparent in its motivations (even if unbecoming), but because it’s just wrong. And it’s especially annoying to be wrong, when you’re constructing a worldview around other peoples’ misimpressions.

The thing is that the economy is not awesome. It’s definitely good in a lot of respects—but the strength of its strengths shouldn’t be overstated, nor should the weaknesses of its weaknesses be overlooked.

What the hoi polloi is experiencing right now is the end of the labor shortage tailwind, which creates real uncertainty around their economic prospects, and has nothing remotely to do with “vibes.”¹

Lemme show you.

Spending growth is slowing because wage growth is slowing because the labor shortage is winding down

The first thing to notice is that spending growth is slowing down.

Spending growth is slowing because wage growth is slowing, as the supply of labor catches up to mostly stagnant demand.

• Look, wage growth and spending growth are pretty well-tethered at the hip:

  

• Supply of labor catching up to demand:

  

  Job openings are slowly creeping back to pre-pandemic levels.

Indeed

Slowing wage growth and slowing spending growth are real things. Not vibes.

Directionally, lower income folks are feeling the good times wane, and now it’s just higher prices that remain (but no steadily increasing paycheck).

Flows have caught up to stocks, and people notice.

I mean, is this a vibe? Or is this economic gears meeting some sand, in one of the more important economic centers of the country: