Why Americans Feel Terrible About an Economy That Looks Pretty Good

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In November 2025, the American economy presents a puzzle. Unemployment sits at 4.2%, inflation has cooled to around 3% from its painful peaks, and the stock market has largely weathered geopolitical instability. Yet consumer sentiment has crashed to levels last seen during the 2008 financial crisis.

This gap between “hard data” (what the economy is doing) and “soft data” (how people feel about it) is called the “Vibecession.” Economic educator Kyla Scanlon coined the term to capture a reality where the “vibes” are terrible even when employment numbers look solid.

The disconnect comes from cumulative trauma: a 43-day government shutdown, a frozen housing market, and the lingering sticker shock of a 24% rise in price levels since 2020. These factors have severed the link between economic output and how secure people feel about their finances.

What the “Vibe Economy” Really Means

The Vibecession challenges classical economics, which assumes people assess their well-being based on objective markers like income and consumption. In the “Vibe Economy,” stories, emotions, and collective sentiment carry as much weight as industrial output or trade balances.

When millions of people feel anxious—whether fed by social media algorithms, political instability, or daily confrontations with high prices—they change their economic behavior. They cut discretionary spending, delay investments, or hoard cash, turning “bad vibes” into real economic contraction.

Scanlon described it in mid-2022 as “the vibes of a recession, but maybe not the economic reality of one (yet).” By late 2025, this definition has evolved. It’s no longer just fear of a future recession; it’s rejection of the current “recovery” as inadequate for the average citizen’s needs.

Why Economists and Consumers Talk Past Each Other

The gap comes down to different ways of measuring progress.

Economists and policymakers focus on flow variables—the rate of change over a specific period. Is inflation slowing? Yes, it dropped to 3% in late 2025. Is the economy producing more this quarter than last? Generally yes, despite the shutdown. Are we adding jobs? Yes, though at a slower pace.

From this perspective, the economy is healing.

Consumers live their lives based on stock variables—the absolute level of accumulation or cost. Are prices higher than they used to be? Yes, significantly. Price levels are roughly 24% higher than in 2020. Has the purchasing power of savings eroded? Yes. Can I afford a home today compared to three years ago? No.

This divergence drives the Vibecession. The average American doesn’t celebrate “disinflation” (prices rising slower); they mourn the permanent loss of affordability they knew in 2019. When an economist says “inflation is down,” the consumer hears “prices are falling,” and when they see eggs are still expensive at the store, they feel gaslighted.

The Vibecession is grief for a bygone era of affordability and a rational reaction to the permanent reset of the cost of living.

The 43-Day Shutdown Made Everything Worse

By November 2025, the Vibecession had evolved from a post-COVID anomaly into deep-seated structural malaise. The psychological landscape was battered by the longest federal government shutdown in U.S. history—a 43-day standoff from October 1 to November 12.

This event didn’t just pause government services. It created an “information vacuum” where official economic data was suspended, allowing anxiety and rumor to fester unchecked.

The political environment of late 2025, with President Trump’s return and intense partisan maneuvering over healthcare and budget cuts, has layered political tribalism over economic sentiment. Unlike previous eras where one party’s optimism offset the other’s pessimism, the chaos of late 2025 has dragged sentiment down across the board.

The Vibecession has become bipartisan, united by shared institutional failure and precariousness.

The Hard Data Still Looks Decent

By historical standards, the U.S. economy in late 2025 performs with remarkable resilience, though it shows cracks from self-inflicted political wounds.

Growth Takes a Hit

The Congressional Budget Office projected a slowdown in late 2025 but not a collapse. Real GDP growth for the year was projected to be positive, driven by consumer spending and business investment that persisted despite high interest rates.

However, the fourth quarter was marred by the shutdown. The 43-day lapse in appropriations shaved between 1.0 and 2.0 percentage points off annualized real GDP growth for Q4. This is a significant drag.

The cessation of pay for 1.4 million federal workers and contractors removed billions of dollars of demand. Tourism revenue collapsed in communities surrounding National Parks, which were shuttered or operated with skeleton crews.

Economists anticipate a “rebound effect” in the first quarter of 2026 as backpay is distributed and deferred federal spending flows back. But for consumers living through Q4 2025, that future rebound is theoretical. The present reality is disrupted cash flow and visible government dysfunction, reinforcing the feeling that the economy is unstable.

The Job Market Paradox

Unemployment in late 2025 stands at 4.2%. In previous decades, an unemployment rate this low would virtually guarantee high consumer confidence. Jobs are plentiful, and mass layoffs, while making headlines in tech or media, aren’t systemic across the broader economy.

However, the nature of this employment contributes to the Vibecession.

The frenetic labor market churn of 2021-2022, dubbed the “Great Resignation,” has ended. It’s been replaced by the “Big Stay.” Workers stay in their jobs not necessarily from satisfaction but from fear. Quitting a secure job feels risky in an uncertain climate, leading to stagnation.

While nominal wages have risen, the “catch-up” game with inflation continues. For many workers, especially in middle and lower income tiers, wage gains have barely kept pace with rising costs of essentials like rent and insurance, leaving little room for feeling “ahead.”

The Inflation vs. Price Level Confusion

The most critical data point—and the primary source of disconnect—is inflation. In September 2025, the Consumer Price Index showed inflation at 3.0%, a slight uptick from the previous month but well within “normalization” compared to 2022.

The hard data says “inflation is conquered.” The consumer says “prices are impossible.” Both are true, but they describe different phenomena. The hard data describes the velocity of the car; the consumer describes the distance from home. We’re very far from home (2019 prices), and the car is still moving forward, though slower.

Consumer Confidence Has Collapsed

If the hard data paints a “B+” economy, the soft data reveals an “F” grade in public confidence.

Historic Lows

In November 2025, the disconnect widened to a chasm. The University of Michigan Index of Consumer Sentiment dropped to 50.3—a catastrophic reading that rivals the darkest days of the Great Recession.

Here’s the context: In June 2022, sentiment hit an all-time low of 50.0. At that time, inflation was peaking at 9.1%, making the pessimism consistent with immediate pain from rapidly rising prices.

In November 2025, sentiment is 50.3. But inflation is now only 3%.

This anomaly is the smoking gun of the Vibecession. Why is sentiment as bad today as when inflation was three times higher? The answer is exhaustion and accumulation. In 2022, there was hope that the inflation spike was “transitory” or a specific shock from the war in Ukraine. By 2025, high prices have calcified into a permanent reduction in standard of living. The “emergency” has become the “status quo,” and consumers are fatigued by constant vigilance required to manage their budgets.

The Conference Board’s Warning

The Conference Board’s Consumer Confidence Index mirrors this gloom, plummeting to 88.7 in November 2025, down nearly 7 points from October. The “Expectations Index”—which measures consumers’ short-term outlook for income, business, and labor market conditions—fell to 63.2. A reading below 80 often signals a recession within the next year.

This suggests consumers aren’t just unhappy with the present; they’re terrified of the future. The prolonged government shutdown acted as a catalyst for this fear, signaling that institutions responsible for managing the economy are unstable. Consumers are “waiting for the other shoe to drop,” fearing political dysfunction will eventually trigger tangible economic collapse.

A Bipartisan Phenomenon

Historically, consumer sentiment correlates heavily with political affiliation. Republicans tend to feel better about the economy when a Republican is in the White House; Democrats feel better under a Democrat.

With President Trump in office in late 2025, you’d expect Republican sentiment to buoy the national average. However, the data shows broad-based decline. The government shutdown alienated voters across the spectrum. A “pox on both their houses” mentality has emerged, where dysfunction in Washington drags down confidence regardless of party affiliation.

While partisan gaps remain, the baseline for everyone has sunk due to institutional instability.

The Shutdown’s Lasting Damage

The “Shutdown Hangover” is critical to understanding November 2025’s mood. The lapse in government funding that began October 1 became the longest in U.S. history, surpassing the 35-day shutdown of 2018-2019.

Timeline of Dysfunction

October 1, 2025: Funding lapses after Congress fails to pass appropriations bills. Approximately 900,000 federal workers are furloughed; millions more work without pay.

The conflict centered on a Republican-led effort to repeal expanded Affordable Care Act subsidies and cut Medicaid—demands Senate Democrats refused to accept, citing the impact on 15 million Americans.

November 12, 2025: President Trump signs a continuing resolution ending the shutdown after 43 days. The deal funds the government through January 30, 2026, setting up another potential cliff just months away.

The Data Vacuum

One of the shutdown’s most damaging effects was suspension of economic data publication. For weeks, agencies like the Bureau of Economic Analysis and Bureau of Labor Statistics delayed reports.

The Federal Reserve and private businesses were forced to make decisions without up-to-date inflation or employment numbers. This “information vacuum” allowed anxiety to fester. Without an official report to say “inflation is stable,” rumors and “vibes” filled the void, often painting a darker picture than reality.

While federal employees eventually received backpay, federal contractors—who make up a massive portion of the government workforce—often did not. This represents permanent income loss for thousands of households, rippling into their local economies.

The Psychological Scar

The shutdown did more than delay paychecks; it broke the “continuity of competence.” For 43 days, the United States government appeared unable to perform its most basic function: paying its bills.

This erodes the “trust capital” the economy relies on. Even after reopening, consumers remain wary, viewing the resolution not as a fix but as temporary reprieve before the next crisis in January 2026. This uncertainty acts as a tax on every economic decision—businesses delay hiring, families delay vacations, and investors hedge their bets.

The Price of Everything Has Permanently Changed

The foundation of the Vibecession is cumulative increase in the cost of living. While the rate of inflation has slowed, the price level remains elevated. Since early 2020, the Consumer Price Index has risen approximately 24%.

The math: If a weekly grocery trip cost $150 in 2019, it costs roughly $186 in 2025. Over a year, that’s an additional $1,872 for groceries alone.

The vibe: The economist celebrates that the bill didn’t go up to $200 this year. The consumer is still angry it isn’t $150.

This is worsened by “frequency bias.” Consumers notice price changes most in goods they buy most often: food and fuel. When these prices remain high, they color perception of the entire economy, even if the price of televisions or furniture has dropped.

Real Wages vs. Reality

Official statistics suggest real wage growth (wages adjusted for inflation) is positive in late 2025. However, this aggregate number hides distributional pain.

Wage growth hasn’t been uniform. While lower-income workers saw significant percentage gains early in the pandemic recovery, those gains have been eroded by specific inflation of essentials—rent, food.

The CPI basket is an average. For a family with children, specific inflation of childcare, food, and housing has likely outpaced their wage growth, even if the “average” worker is ahead. The “real wage” victory is a statistical truth but a personal fiction for millions of Americans who feel their purchasing power has shrunk.

The Housing Crisis Drives the Vibes

Perhaps the single largest structural driver of the 2025 Vibecession is the broken housing market. Housing isn’t just shelter; in the U.S. economy, it’s the primary vehicle for wealth creation, forced savings, and social mobility. In 2025, that vehicle has stalled.

Affordability at Historic Lows

The combination of high home prices and high interest rates has created the least affordable housing market in decades.

Mortgage rates in late 2025 hover around 6.7%. While down from peaks of 7-8%, this is still double the rates seen in 2020-2021.

Despite higher rates, home prices haven’t collapsed. They rose 4.4% in 2024 and another 3% in 2025.

The result: The monthly payment on a median-priced home has skyrocketed, effectively locking out first-time buyers. For Generation Z and Millennials, the “American Dream” of ownership feels mathematically impossible.

The Lock-In Effect

The market is frozen by the “lock-in effect.” Millions of homeowners secured mortgage rates below 4% during the pandemic.

If a homeowner sells their current house to move for a job or growing family, they must trade a 3% mortgage for a 6.7% mortgage. This could double their monthly interest costs for a similar—or even smaller—home.

This paralyzes the housing market. Inventory of existing homes for sale remains near 30-year lows because nobody wants to sell.

It also hurts the broader economy by reducing labor mobility. Workers can’t move to high-growth cities for better jobs because they can’t afford to give up their cheap mortgage.

The Supply Shortage

The root cause is chronic lack of supply. Estimates suggest the U.S. is short between 1.5 million and 5.5 million housing units.

The National Association of Home Builders identifies the “5 Ls” as primary headwinds preventing builders from closing this gap:

Labor: A chronic shortage of skilled construction workers, worsened by an aging workforce and immigration restrictions.

Lumber: High costs of materials, driven by tariffs and supply chain friction.

Lending: Tight credit conditions for developers making it harder to finance new projects.

Lots: A lack of buildable land, often due to restrictive zoning.

Laws: Regulatory burdens and exclusionary zoning (single-family-only zones) that make it illegal to build dense, affordable housing in high-demand areas.

Until the housing ladder is fixed, the “vibes” of the economy will remain broken. A generation of permanent renters feels structurally excluded from the prosperity they see in GDP numbers.

Politics and the Affordability Crisis

In late 2025, the economy can’t be separated from the volatile political landscape. The policies and rhetoric of the Trump administration and opposition in Congress directly shape consumer sentiment.

Trump’s Affordability Pivot

Recognizing the political danger of the Vibecession, the Trump administration attempted a pivot in late 2025.

Following the shutdown and plummeting approval ratings, President Trump held a high-profile meeting with New York City Mayor-elect Zohran Mamdani. The meeting, focused on cost of living, was dramatic political theater intended to show the President crossing the aisle to address “affordability.”

The administration has floated ideas like “tariff dividend checks”—sending $2,000 to Americans funded by tariff revenue. While politically popular, economists warn this is “fiscal fantasy,” as the revenue doesn’t exist to support such payments without exploding the deficit. The tariffs themselves act as a tax on consumers, raising prices and potentially worsening the inflation vibe.

The administration’s push to repeal ACA subsidies was a central cause of the shutdown. This creates a contradiction: trying to lower the “cost of living” while simultaneously threatening to raise healthcare costs for millions.

Project 2025’s Shadow

The influence of “Project 2025”—a conservative policy blueprint—has also contributed to underlying anxiety. Proposals to eliminate the Department of Education, cut overtime protections, and reduce corporate taxes while raising taxes on the middle class have created foreboding among many workers.

The fear that the “rules of the game” are about to change unfavorably for the middle class fuels negative sentiment, regardless of current employment status.

Social Media Amplifies the Anxiety

We live in an information ecosystem that privileges outrage and anxiety. “Bad news travels fast” has been upgraded to “Bad news goes viral and is algorithmically amplified.”

The Bad News Bias

Studies confirm that economic news coverage has become systematically more negative, decoupling from economic fundamentals. A stock market all-time high gets a brief mention; a recession prediction gets prime-time or a viral thread.

In a fragmented media landscape, fear drives clicks. Content that screams “The economy is collapsing!” generates more engagement than “Unemployment holds steady.”

Social media platforms like TikTok and Instagram worsen this by creating “money dysmorphia.” Users are bombarded with dual narratives: the “doom scroll” of economic collapse and the “envy scroll” of influencers flaunting unattainable wealth. This distorts perception of their own financial reality, making a stable middle-class life feel like failure.

Gen Z and Hopelessness

For Generation Z, this media environment is their primary reality. They’re not consuming Bureau of Labor Statistics reports; they’re consuming “Vibe Economy” content that validates their fears about the future.

This generation sees high costs, climate anxiety, and political dysfunction, and concludes the “system” is rigged against them. This sentiment is sticky; it doesn’t change just because GDP ticks up.

The Mental Health Crisis

The result of these converging pressures is a national mental health crisis rooted in financial stress.

Nearly 70% of Americans report that financial uncertainty makes them feel depressed or anxious. This stress isn’t just mental; it manifests physically. 41% of Americans report chronic physical symptoms like pain or fatigue linked to financial stress.

A staggering 76% of people feel “alone” in their financial struggles, despite the fact these struggles are systemic and widespread.

This “financial anxiety” acts as a drag on the economy. Anxious consumers are less likely to take risks, start businesses, or spend confidently. They operate in a defensive crouch, prioritizing safety over growth.

What Would Actually Fix This

Fixing the Vibecession requires moving beyond PR and addressing root causes of distress. We must lower the cost of living, not just the rate of inflation, and restore faith in institutions.

Fix Housing Supply

The most effective way to improve economic vibes is to make housing affordable again. This requires a massive increase in supply.

Incentivize Zoning Reform: The federal government should condition infrastructure grants on states and municipalities abolishing exclusionary zoning. If a town wants federal money for roads, it must allow duplexes and accessory dwelling units.

Workforce Development: A “Blue Collar Visa” program or massive investment in trade schools is essential to solve the labor shortage in construction.

Tax Credits for Builders: Shift subsidies from demand (which raises prices) to supply. Provide tax credits to builders who construct entry-level “starter homes,” incentivizing them to build for the middle class rather than the luxury market.

Stabilize Essential Costs

Congress must target specific “pain points” in the monthly budget.

Antitrust Enforcement: High food prices are partly due to consolidation in agriculture and retail sectors. Rigorous antitrust enforcement can break up monopolies in meatpacking and groceries, increasing competition and lowering prices.

Healthcare Cost Capping: Permanently extending ACA subsidies is crucial to preventing a shock to household budgets. Additionally, capping out-of-pocket costs for prescriptions creates a tangible “win” for consumers.

End Government by Crisis

The 43-day shutdown must be the last of its kind.

Congress should pass legislation that creates “Automatic Continuing Resolutions.” If a budget isn’t passed by the deadline, funding automatically continues at current levels.

The kicker: To incentivize a deal, the legislation should ban Congress from recess, travel, or considering other legislation until the budget is signed. This puts the pain of deadlock on politicians, not the public or the economy.

Change How We Talk About the Economy

Policy takes time; culture can shift faster. We need to change how we talk about the economy.

Stop Gaslighting with GDP Charts

Leaders must stop dismissing public pain with economic data.

Validate the Pain: The message should shift from “The economy is great!” to “We know prices are too high, and here is the plan to lower them.” Acknowledging the level of prices validates consumers’ lived experience.

New Metrics: Reports should highlight “Quality of Life” metrics alongside GDP. “Real Disposable Income” (what’s left after bills) and “Time Affordability” (how many hours you have to work to buy a tank of gas) track closer to sentiment than raw output numbers.

Fix the Information Diet

Financial Literacy 2.0: Education needs to move beyond balancing a checkbook. We need to teach “media literacy for the economy”—how to spot fear-mongering, how to understand the difference between anecdotal viral videos and data, and how to read a graph without panicking.

Algorithmic Transparency: Regulators should push social media platforms to be transparent about how their algorithms amplify negative sentiment, giving users more control over their information diet.

What 2026 Holds

As the United States looks toward 2026, the “Vibe Economy” remains the dominant force. The hard data suggests a soft landing has been achieved, but the soft data suggests passengers are still in the crash position.

If the housing market can be unlocked—either through rate cuts or a massive supply initiative—and if Washington can manage a year of stability without another shutdown, the “vibes” can recover.

However, if the disconnect persists, the “Vibecession” risks becoming a self-fulfilling prophecy, where gloomy sentiment eventually drags the real economy down into the recession everyone fears.

The challenge for 2026 isn’t just economic growth; it’s economic healing. It’s about closing the gap between the spreadsheet and the street, ensuring prosperity on paper translates into peace of mind for American families.

Economic Indicator Snapshot (November 2025)

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