Two economic metrics out this week are sending strong signals of a soft landing to come in the Federal Reserve’s inflation fight: The Paychex-IHS Markit Small Business Employment Watch shows wage gains slowing while still outpacing year-over-year inflation, and last month’s ISM Manufacturing Index showed lower prices for goods. 

But data isn’t the only thing that matters when it comes to diagnosing the health of the current, often-befuddling economy. How we feel about the economy has been shown to shape our economic reality just as much as the numbers themselves. 

Enter the “vibecession” — a theory coined by online content creator and independent economics educator Kyla Scanlon. Scanlon has become something of an online economics sensation, with over 160,000 followers on TikTok. In a Substack post last summer, Scanlon announced that the U.S. was in a “vibecession,” or a recession shaped by bad economic vibes. 

“It’s when the sentiment is down, despite the fact that it seems like the economy is just humming along,” Scanlon said in an interview with “Marketplace” host Kai Ryssdal.

Consumer sentiment — a.k.a. vibes — seem to be on the uptick lately. So Ryssdal checked in with Scanlon to see if we’ve finally exited the “vibecession” — and maybe skirted a real recession in the process. 

The following is an edited transcript of their conversation.

Kai Ryssdal: So the vibecession — I need you to, first of all, define some terms for me here. Last time we talked, we went over it a little bit. Remind people.

Kyla Scanlon: Yeah, so it’s a temporary vibe decline, even though the economic data is doing OK. So it’s when the sentiment is down, despite the fact that it seems like the economy is just humming along.

Ryssdal: OK. Now you have written recently, actually, and I don’t remember if it was before Powell’s last press conference or just after, but you wrote the other day that maybe the vibecession is over.

Scanlon: A lot of people have been saying that, and Bloomberg actually published this piece saying it was over, so I guess it is! Consumer sentiment is at all-time highs, but it’s such a tough question to answer — like, are people actually feeling better? Because there’s still so much improvement that has to happen. And if you go to somebody and you’re like, “Well, things could be way worse than they are,” it doesn’t feel that good. But it seems like most people are feeling a lot better. Real wages are finally starting to tick up. The labor market is holding steady, despite the Fed’s efforts to have it maybe not be steady. So I think things are trending upward for most people. But still, it can feel like there’s sometimes maybe something missing or something a little bit off.

Ryssdal: You know, we have all — and by we, I mean economic and business journalism, and you, the trained observers out there who also do this — have been spending a lot of time the last like year and a half saying, “Are we in a recession? Are we not in a recession?” Should we just stop doing that?

Scanlon: Yeah, Bank of America actually published a piece today saying, “Yeah, you can just get over the idea that we are in a recession” and that we might not go into one. So I think that’s the big thing is we’re constantly talking about, “Oh, are we going into a recession? Like, a recession is coming, recession is coming!” And a recession has been coming since we last had a recession. It seems like the economy is doing OK, but there’s a lot of stuff coming in the fall, like student loan payments starting back up, Fitch downgrading the United States. It’s not gonna cause a recession, but it’s just another point that could be something to watch out for. But it seems like the economy is holding up pretty well, all things considered.

Ryssdal: I want to get to the Fitch credit rating thing in a second, but how do you measure the vibes? What do you look at?

Scanlon: Oh, man, I look at a lot of different things, like Twitter, or X I guess it’s called now. And also in my comment section, you know, I have 500 different comments pretty much every day across all the different platforms of people telling me how they’re experiencing their lives and how they’re experiencing the economy. So I use that as a gauge. And then, you know, talking to friends, talking to different people in the community. So there’s a lot of different indicators that you can use, but usually the general sentiment of social media, which is of course a little bit skewed, as well as going out into the real world and talking to people. Yeah.

Ryssdal: OK, the Fitch thing, the downgrade came yesterday afternoon, there was much wailing and gnashing of teeth. Let me ask you, though, how big a deal is it, really?

Scanlon: I don’t know. It’s kind of interesting. It’s an interesting timing for sure. Like, everyone’s sort of like, “Why did you do this now, Fitch? It seems a little bit political.” But of course, everything is political at the end of the day. But I think for Fitch, you know, they were pointing to the debt ceiling, they warned about this. They were like, “If you all don’t get it together with the debt ceiling, you’re gonna get downgraded.” And of course, the United States sort of got it together of the debt ceiling. But that’s still an issue. I think they’re worried about, you know, they listed expected fiscal deterioration, it seems like the Fitch director talked about the Jan. 6 issue, just the polarization in the United States, and just worries over whether or not the two political parties will be able to reconcile.

Ryssdal: Right. But but we should also say here, it’s not a reflection of the state of this economy, just to get back to the vibecession, right? I mean, the economy is good and strong. And Fitch is specifically not saying that it’s about the economy.

Scanlon: No, they’re saying it’s about the financing of the economy, the future financing of the economy, and whether or not it will be able to continue. So the economy right now is strong, but Fitch pointed to skewed demographics, so like Medicare, Social Security, just being able to finance that, but that all of that is very much far down the line. The medium-term fiscal framework is something that they listed, so I think it’s like the future of the United States. But the economy right now is sound and presumably, it’ll be sound in a few years. It seems like most things get figured out over time.