‘Vibecession’ Got You Down? You’re Not Alone, but the Economy isn’t Bad

23 May, 2024 Frank Ferreri

                               

Orlando, FL (WorkersCompensation.com) -- If you think we're headed in the wrong economic direction, you're in good company, as a good chunk of Americans agree with you.

Over the past couple of years, as Stephen Cooper told attendees at the NCCI Annual Insights Symposium session, "State of the Economy and Impact on Workers' Compensation," the general malaise many of us feel about the economy has become so common that it's turned into a "Vibecession."

The term, which has appeared in headlines and social media posts, originated on Kyla Scanlon's blog and refers to the phenomenon in which things might not be that bad, but they feel that way, raises questions about the possibility of a recession by self-fulfilling prophecy.

"The economy is in relatively good shape, but it doesn't feel that way," Cooper said. "Can we manifest a downturn?"

It's not completely out of the question, as Cooper noted that in June 2022, consumer sentiment was lower than any point in the Great Recession. Paradoxically, however, consumer spending continued to grow and "actually picked up steam" during the same period.

Being an economist, Cooper looks at the numbers, not the feelings, to decide what's going on with the economy.

Looking at the Jobs Openings and Labor Turnover Survey data, Cooper said that the labor market shows a normalizing, rather than deteriorating economy.

"Layoffs have settled at about 15% lower than pre-pandemic levels," Cooper said. "So what we have is a labor market that's starting to look normal."

Low layoffs and workers staying put is a positive thing for workers' compensation, Cooper said, because the most likely workers to file a claim are those who have been on the job for less than 12 months.

What about Inflation?

Possibly the biggest factor influencing the vibecession has been inflation, but Cooper said that it's coming back to earth after it hit a 40-year high in 2022 (Cooper noted that the last time inflation was at levels we saw in the past couple of years, the "Volcker Moment" led the country into a recession when the Federal Reserve Chair Paul Volcker oversaw increasing interest rates that touched off a historic downturn).

"Inflation is coming down," Cooper explained. "That doesn't mean things are getting cheaper, it just means that things are getting more expensive slower."

Cooper noted that the key concern around inflation was how high interest rates would remain and for how long. However, in historic perspective, Cooper explained that the "zero interest rate period" that has been the norm since the 2008 crash is anomalous when compared to the usual cycle of increasing and falling rates. For example, in the early 2000s, just a few years prior to the Great Recession, interest rates were higher than they are today. Even just before that downturn, they were around what they are now.

Ultimately, though, questions about rates get a "it depends" kind of answer.

"The economy will dictate, and it will depend largely on the labor market," Cooper said.

We're Getting Older

One other trend that is squarely in our laps is the changing make up of the workforce. As the population has continued to trend older, so has the workforce. At the same time, there's a takeover in who's in the labor market.

"In six years, most of the workforce will be millennials and Generation Z," Cooper said. "Not Generation X and the Boomers."

What that means is that we'll see flattening or declining numbers across the labor force for older, prime age, and younger workers.

But for those who expect something humanmade to cause a recession, Cooper doesn't think it's likely, vibes or not.

"What we've seen going back to 1982, the last manmade recession, is that something large and external usually causes a downturn," Cooper said. "It's a large, catastrophic event," like a market crash or a pandemic.


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    About The Author

    • Frank Ferreri

      Frank Ferreri, M.A., J.D. covers workers' compensation legal issues. He has published books, articles, and other material on multiple areas of employment, insurance, and disability law. Frank received his master's degree from the University of South Florida and juris doctor from the University of Florida Levin College of Law. Frank encourages everyone to consider helping out the Kind Souls Foundation and Kids' Chance of America.

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