Sometimes, numbers are just numbers. Sometimes they are loaded with years of emotional baggage and pain.

The pain of four-plus years of frustration and the very real lack-of-progress we feel we’ve made in our own lives vs. where we want to be are real. Nothing is as it was, nothing (it seems) is where it should be.

We are at full employment, the lowest unemployment rate since 1968. Some would have you believe we are in the midst of a Second Great Depression.

Here are some of the objective facts, the numbers:

• Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024
• 2.2% inflation right now, the lowest in the G7
• GDP, Growth is the strongest in the world; according to the World Bank, US will be responsible for 80% of 2025 forecasts GDP
• In 1990, U.S. made up 2/5 of the G7, today the U.S. makes up half*‍
• 76 record highs in the stock market in the last year

‍Yet we feel as uncertain as ever.  Or, as it’s been said “the vibes are off.” Thus, the origin of the phrase “vibecession” — things are bad because they feel bad. Any data-driven marketer has experienced the disparity between what the data says and how things feel.

Is it just the election? Is it inflation? Something else? Where’s the disconnect?

The disconnect hinges on expectations and what ‘was’ vs. what ‘is.’ COVID-19 caused such a gargantuan disruption in our daily lives and in how trade is conducted that while it may be ‘over,’ things are not the same. 

Let’s look just at the pricing and inflation piece of this. This is where I believe the root of our disconnect is about what ‘was’ and ‘is,’ and ‘should be.’     

As an established economy with established economic measurements, we have some standard (numeric) ways of looking at things. CPI and Core CPI are a few of the most talked about. Let’s start with definitions, and then we’ll get into how / why these metrics do a very poor job of describing or connecting the very real feeling humans have about prices and inflation as they navigate their daily lives: 

1. Consumer Price Index (CPI):**

• The most widely-used and reported measure of inflation
• Produced by the Bureau of Labor Statistics (BLS)
• Measures price changes in a basket of goods and services purchased by urban consumers
• It uses a fixed basket of about 80,000 items (including housing, energy, transportation, and apparel)
• Reported monthly as a percentage change from the previous month and as a year-over-year change

2. Core CPI:

• Excludes food and energy prices, which tend to be volatile.
• Considered a better indicator of underlying inflation trends.

Since I don’t know anyone who can go more than a day without paying for food or energy in some form, it seems most instructive—if we are trying to understand how people feel about the economy and why—to look at CPI.

I then asked my favorite AI tool, “Give me 10 years of CPI data” (shown here from Perplexity Pro)

The highest inflation rate in this period was in 2022 at 8.0%, followed by 2021 at 4.7%.  Back to expectations; the years 2014 – 2020 saw inflation between 0.1% and 2.4%, a stimulatory environment when the Fed buying public equities (quantitative easing). We expected this to continue. No one expects a pandemic (or the Spanish Inquisition…. Monty Python fans? Anyone? Just me?). So when it happened, not only was it jarring, but few expected a reset to a new level.

"When numbers are just numbers, inflation is a statistic. When numbers carry emotional baggage, inflation becomes a story of loss."

This is where the numbers themselves create that disconnect. The calculation, the metric – is by its very nature completely divorced from how we experience pricing as we navigate our lives. What’s missing? What’s the secret piece that makes these numbers (and I love numbers) nearly useless in describing what’s happening in our world, when we’re paying for things?

Compounding. 

Compounding. That fairy that we love so much when it increases to our bank accounts and our stock portfolios.  That magical nymph takes whatever percent increase we are talking about and applies it to the entire amount. That fairy? It becomes the devil when it comes to inflation and CPI.

What we experienced was a nasty reset of the base. That 2.4% inflation rate that we have right now has baked in the 4.1% from 2023 applied to it, on top of the 8.0% increase of 2022, which was on top of the 4.7% in 2021…. You get the point. 

To make matters worse, according to FRED (Federal Reserve Economic Data), real average hourly earnings decreased by 1.8% from 2021 to 2023.

"A 2.4% inflation rate sounds modest until you realize it's climbing a mountain built by the 8% and 4.1% that came before it."

So when you go to the store as I did and can’t get a dozen eggs for less than $7.00 (I’m in Manhattan, which is arguably inflated already), and you have in your mind the 2019 price of $3… and you are being told by the numbers that ‘the most recent data (2024) shows inflation moderating to 2.4%, down from the high levels of 2022 and 2023….’ none of this matters to you, the individual paying $7 for a dozen eggs. Income gains have not kept pace with inflation. The numbers don’t capture the feeling that $7 is too high, that it should be $3, and now I have $4 less to spend on the other stuff I have to buy (healthcare, technology, other food, etc) than I should.

Arguably, objectively, the state of the U.S. economy is fairly healthy; strong, even. Arguably, emotionally, it feels like a garbage can.

What’s next: The next Consumer Price Index (CPI) report will be released on Wednesday, November 13, 2024, at 8:30 AM Eastern Time

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Footnotes

• ‍_{*Scott Galloway / Kara Swisher Podcast, Elon’s Million Dollar Giveaway, Oct 22}
• _{** Perplexity AI “What kind of metrics do we use to measure inflation?”}
• _{CPI data: Note: The 2024 figure is the most recent available (September) and not an annual average. For years prior to 2020, annual averages were calculated based on the percent change data provided in the search results.}