Vibecession: More Than You Wanted to Know

Scott Alexander

Dec 04, 2025

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The term “vibecession” most strictly refers to a period 2023 - 2024 when economic indicators were up, but consumer sentiment (“vibes”) was down. But on a broader level, the whole past decade has been a vibecession.

Young people complain they’ve been permanently locked out of opportunity. They will never become homeowners, never be able to support a family, only keep treading water at precarious gig jobs forever. They got a 5.9 GPA and couldn’t get into college; they applied to 2,051 companies in the past week without so much as a politely-phrased rejection. Sometime in the 1990s, the Boomers ripped up the social contract where hard work leads to a pleasant middle-class life, replacing it with a hellworld where you will own nothing and numb the pain with algorithmic slop. The only live political question is whether to blame immigrants, blame billionaires, or just trade crypto in the hopes that some memecoin buys you a ticket out of the permanent underclass.

Meanwhile, economists say things have never been better.

Are the youth succumbing to a “negativity bias” where they see the past through “rose-colored glasses”? Are the economists looking at some ivory tower High Modernist metric that fails to capture real life? Or is there something more complicated going on?

We’ll start by formally assessing the vibes. Then we’ll move on to the economists’ arguments that things are fine. Finally, we’ll try to resolve the conflict: how bad are things, really?

I’ll assume you’ve already heard the complaints about the economy coming from the media, social media, et cetera. But are we sure there isn’t a meta-vibecession? The vibes about the vibes are bad, but really, the vibes are good? Maybe the media just -

• oh god, no, it’s even worse than I thought. The vibes are awful.

This is the official measure of vibes, the Index of Consumer Sentiments. Can we trust it?

One reason not to trust it is that most of its questions take a form like “do you think things are better than last year?” or “do you think things will be better next year?” These are local and don’t really allow you to compare today vs. 1980. But consumers are terrible at answering these questions in the spirit in which they’re intended; for example, when the economy is bad, “do you think things will be better next year?” reaches a low, even though bad economies are exactly when you would expect next year to be better (through mean reversion). So it’s probably fair to treat this as overall “vibes: good or bad?”

Another reason not to trust it is that they changed the survey methodology in 2024, causing multiple trend breaks; instead of adjusting for this, they “smoothed it out” so people wouldn’t notice! This seems irresponsible and I don’t know how they got away with it. Everything after 2024 should arguably be ~5 points higher. But even adding 5 points, things now look pretty grim.

The Gallup Economic Confidence Index, which doesn’t have the methodology problem, looks pretty similar:

This is a combination of an absolute question (“how are conditions?”) and a relative question (“are they getting worse or better”), but you can disambiguate them here and get similar results.

There is one anomaly, which is that I remember people complaining about the bad economy and the Boomers and hellworld since well before 2020 (consider the Trump and Sanders campaigns), but the official vibes didn’t crash until COVID. Is my memory faulty?

Here’s real median household income in the US over time (source):

People today earn 33% more than they did during the Boomers’ heyday.

Might this just be a few billionaires bringing the average up, while the incomes of ordinary people stagnate? No: this is median income. You’re thinking of mean income. The mean can be brought up by a few outliers; the median represents the exact most ordinary member of society. If you insist, here are the same data presented as the share of society making more than a certain threshold in inflation-adjusted dollars (source):

Might cost-of-living increases have eaten all of these gains and then some? No: this is real median income, ie adjusted for inflation. Cost-of-living increases are a type of inflation, so those should be priced in.

Might this just represent old people doing better, while the young are left behind? No: here are the same data disaggregated by age group (source):

Young people’s incomes have increased as fast as everyone else’s. And the youth-specific unemployment rate was near historic lows until last year (some people blame the current uptick on AI, but this is too recent to have caused the vibecession):

Here’s an attempt to compare generations directly. We can’t do this as a point-in-time estimate, because late-career old people will always earn more than early-career young people, but we can compare how much people made in inflation-adjusted dollars at the same ages:

Just as our previous graphs imply, Millennials and Zoomers earn significantly more than Boomers did at the same age, even in inflation-adjusted dollars.

So, the economists conclude, maybe it really is just vibes. We know of other cases where the public believes things are worsening even as they get better: crime rates are the classic example.

But most people judge crime rates by what they hear on TV. Vanishing economic opportunity is much more personal. Can people really be wrong about something so close to their own lives?

We start by looking at other people’s proposed solutions.

The term “vibecession” most strictly refers to the period 2023 - 2024 when economic indicators were up, but consumer sentiment was down. During that period, Noah Smith popularized a paper by Darren Grant arguing that this corresponded to a brief decline in real wages, even though stocks and other indicators kept rising:

During COVID, the government instituted various relief programs which temporarily gave people lots of money (the spike). This caused some inflation, which temporarily lowered real (ie inflation-adjusted) wages. Then inflation calmed down and real wages started rising again - thus Noah’s post title, “The End Of The Vibecession?”

With the benefit of two more years of data, we see that Noah and Darren were right about the trend:

Wages never jumped back to the point where they would be if the pandemic had never happened, but they’re back to growing as fast as ever.

So this could explain the mini-vibecession of 2023-2024. Still, I claim there is a broader vibecession. Young people felt closed out from opportunities before 2023, and they still feel that way.

Since only the 2023-2024 period saw falling real wages, this can’t be the full explanation.

John Burn-Murdoch, after examining some of these same data, agrees that wages can’t be the full story. He writes:

Are millennials wrong to complain? I fear not. The per capita measure is a beautifully simple rejoinder, but it misses one crucial detail. Wealth accumulation — just like income — matters primarily to millennials today as a means to home ownership, especially as we move into an era of high interest rates. If we deflate wealth by the index of house prices instead of the CPI, millennials’ assets only go about half as far as boomers’ once did. We’re left with a smaller millennial deficit than the original chart implied, but a deficit nonetheless.

The YIMBYs at Works In Progress go further, and present The Housing Theory Of Everything (or at least of everything bad):

Try listing every problem the Western world has at the moment. Along with Covid, you might include slow growth, climate change, poor health, financial instability, economic inequality, and falling fertility. These longer-term trends contribute to a sense of malaise that many of us feel about our societies. They may seem loosely related, but there is one big thing that makes them all worse. That thing is a shortage of housing: too few homes being built where people want to live. And if we fix those shortages, we will help to solve many of the other, seemingly unrelated problems that we face as well.

Here is the Case-Shiller index, the standard measure of US home prices. I’ve started it in 1985 to match our other graphs:

If I were designing an index to present the case that capitalism had not failed, I would have avoided naming it “Case Shiller”.

During this time, average home price has approximately doubled.

Might this only reflect falling interest rates? That is, suppose people can only afford a certain level of monthly mortgage payment. When interest rates are high, that mortgage payment would correspond to a cheap house; when they are low, that same person willing to spend that same amount could buy a more expensive house. To really work with this, we need average mortgage payment over time.

…but it matters a lot whether this that spike at the end is a temporary pandemic effect or a permanent regime change. I’ve tried to calculate an updated version from FRED data:

Average monthly payment in 1985 dollars. Going to tell my bank I’m paying my mortgage in 1985 dollars from now on.

This matches Drum’s data enough to build confidence, and it shows that the post-pandemic spike has lasted. Mortgage payments are almost twice as high as in the 2010s.

The COVID housing spike was partly a function of lockdown locking people in their houses (meaning that having a nice house was more important), and partly a function of the government cutting mortgage rates to alleviate lockdown-related economic distress. But why did it last even after COVID lockdowns ended?

Partly because the homebuyers who bought houses during COVID will never move again, because that would mean giving up their great mortgages.

Partly because remote work is still popular, meaning that having a nice house remains more important than before the pandemic.

Partly because although lockdowns dealt the original blow to the construction industry, tariffs and immigration crackdowns keep punching it while it’s down.

Partly because of sticky prices - if you bought your home for $1 million, you will feel psychological resistance to selling it for $800K, and are likely to hold out for $1 million even if $800K is the “market price”.

Partly because the bill for ~50 years of NIMBYism has finally come due.

Does this fully solve the vibecession problem? I don’t think so. For one thing, if we take the Trump and Sanders argument seriously, the bad vibes had already started in the late 2010s, when real mortgage prices were the lowest in decades. And even today, mortgages are no worse than in the 1980s, during the high interest rates of the Volcker Shock.

For another thing, the loudest complaints come from young people who don’t have mortgages anyway. What about rents?

Inflation-adjusted rents have gone up 30% since 1985. And the growth accelerated in the mid-2010s, around when vibecession-style complaints began to grow.

But people are earning more now. What about rent as a fraction of salary?

Here the change is smaller: an increase of maybe 10% since the early 2010s. This is bad. But on its own, it’s hardly hellworld and the shredding of the social contract.

Finally, yes, housing has gotten more expensive. But other things have gotten cheaper. That’s why inflation/cost-of-living is only what it is, and not some larger number. We already adjusted for inflation. This is just putting a magnifying glass on one aspect of the thing we already adjusted for.

Mortgages have gone up 100% since 2021. But this doesn’t fully explain the vibecession, because it seems to have started before that, and even non-mortgage-holders are angry.

Affordability of rent has gone down 10% since the 2010s, but could a 10% change really cause this much concern?

In theory, these should be counterbalanced by other things getting cheaper.

Adjusted for inflation, everything is fine. So if we notice that things aren’t really fine, maybe we calculated inflation wrong.

Every so ofte