Perhaps we've managed to break free from our prolonged economic slump.
Listen up, buddy.
Nobody's thrilled when they hear the economy's doing swell while their personal finances are in shambles, right? So I ain't gonna lie to you and tell you everything's dandy. But here's the deal: There's a pile of positive economic shifts happening (even though we're still dealing with that pesky housing crisis that's got a real killjoy vibe going on).
As Matt Phillips from Sherwood put it last week, we're about to say goodbye to those meh-to-bad vibes, thanks to two key factors: Gas prices are dropping while stock prices are skyrocketing.
Neither the Dow's record level nor the cost of a gallon of gas by itself tells us much about the economy's health. In fact, they usually move independently of broader factors like employment and housing. But they're important for our feelings, you know, psychologically speaking.
Most folks aren't crunching payroll data or tracking global crude output. But you might catch headlines about the stock market soaring, and you definitely know how much it costs to fill your gas tank.
It's all about good vibes 101: higher stocks + lower gas prices = happy days.
Gas prices in the US, currently hovering at $3.21 per gallon, might dip below $3 by October, maybe even sooner. That's good news for drivers and also Democrats, who see their approval ratings climb when gas is cheap (even though they can't directly control the global oil market).
And guess what? Stocks reached new heights last week following the Fed's interest rate cut. All three major indexes are on course for a profitable September – historically a tough month for Wall Street.
Hold up! That's not all, mate.
After two years of high inflation and sky-high interest rates, things are starting to normalize.
The Fed, feeling confident that the inflation fight is over, lowered interest rates for the first time in four years, and hinted at more cuts to come. That makes it cheaper for businesses to borrow money and expand their operations. Plus, it eases the sting of credit card bills and other expenses.
Unemployment remains low, around 4%, and wages have been outpacing inflation for over a year and a half. That's a positive sign for consumers, who drive the economy.
The "vibecession," popularized in 2022, suggested that the economy wasn't as great as the numbers showed. Yeah, jobs were plentiful, and the economy was growing, but high prices and high interest rates made people feel down.
Brendan Duke, a senior director for economic policy at the Center for American Progress, explained how much interest rates can impact people's economic mood. "A lot of people have been saying for the last year, 'it's going to take time for the falling inflation rate and falling interest rates to start registering in people's minds,'" he said. "And I think that's finally starting to hit."
But don't let that housing crisis fool you, buddy.
Shelter costs are absurdly high for many renters, and buyers have been locked out by high prices, low supply, and sky-high mortgage rates. Yes, the Fed's rate cut might help break that lock, but the housing crisis is a beastly problem that needs more than just the Fed's help.
Mortgage rates have been coming down for months, and they might even dip below 6% soon. But that might make things worse, straining the already limited supply even more.
Some experts estimate that we need up to 7 million new housing units to stabilize the market. And while both Vice President Kamala Harris and ex-President Trump have proposed solutions to increase supply, the process will take time.
The housing shortage has helped push prices to all-time highs. According to the National Association of Realtors, the median existing-home sales price was $416,700 in August, just a tad lower than the record high of $426,900 set in June.
It ain't hopeless, but it's deeply entrenched, with supply issues dating back to the 2008 recession.
As Duke put it, "There are economic trends like falling interest rates, and there are policies like investing in housing supply that can make a difference. But I think housing is going to consistently be a challenge for Americans because, first, it took us so long to dig into this hole. And second, it's a challenge in a lot of our peer countries – Canada, Australia, New Zealand – they're facing the same issue."
Despite the ongoing housing crisis bringing a somber mood, the recent economic shifts are beneficial for businesses. With the Fed lowering interest rates and suggesting more cuts, it's becoming cheaper for businesses to borrow money, expand operations, and ease the burden of credit card bills.