The Vibecession Is Entirely Rational

Consumer sentiment can decline to record lows while unemployment remains low and stock markets reach highs. Inflation releases each month do not provide a single clear signal because different price categories move differently and households experience costs unevenly. People may feel worse even when aggregate labor statistics look strong, since everyday prices can rise faster than wages or than what headline inflation measures capture. Models that connect consumer sentiment to economic conditions can explain the coexistence of pessimism, low unemployment, and strong equity performance. The gap between perceived and measured economic reality fuels internet arguments over whether outcomes are driven by data or by “vibes.”

"The data is nuanced, which is a big reason why this debate is so interminable, because it is defined by naive content creators and hyperbolic posters like Will Stancil and the infinite number of tankies in his mentions endlessly arguing about economic data they have all spent a combined zero years studying in any serious depth. It is fucking exhausting for those of us who have been humbled by how much we don't know about this subject to hear people like Will Stancil say that it is 100% vibes while the people in his mentions say that data from the Bureau of Labor Statistics (BLS) is obviously faked."

"The data scientist G. Elliott Morris wrote a terrific piece last month about models he built that explain how consumer sentiment can keep plunging to all-time lows alongside a low unemployment rate and an all-time high stock market. Before reading it, I did agree with the Stancilites and thought that consumer sentiment surveys just broke for some unknown reason after the COVID shock and weren't as valuable as they used to be, but Morris's models changed my mind."

"In short, it's the prices, stupid, and this gets to part of economics that neither the vibes-based Stancilites nor the BLS truthers have grasped. The BLS truthers have BLS data proving them right, and Stancil wrong. When the inflation figures come out every month, it is not one simple "here "

"Any time anyone says they are dead certain about something in economics or finance, this is what you sound like to everyone who has ever studied or worked in these admittedly voodoo-adjacent fields."

Read at Jezebel