Why 4.3% GDP Growth Proves the ‘Vibecession’ Theory Is Historically Inaccurate

Merry Christmas. The economy is bouncing back.

When evaluating our economy—or any economy, for that matter—you want to know if it’s growing, if there are enough jobs for people, if borrowing costs are reasonable, and if the dollar you hold today is roughly worth what it was a year ago. If those four metrics are solid, we’re in good shape. Using Pareto’s 80/20 principle—the idea that 20% of any data set accounts for 80% of its total value—we know real GDP, the unemployment rate, interest rates, and inflation drive most of what matters most.

Even if those four numbers are excellent but every other economic indicator is falling apart, we’d still earn a B grade. If all other indicators are great but those four are poor, we’d get an F.

These four pillars are the strongest counter to the “vibecession” idea—a state marked by persistent negative “vibes” and economic malaise from factors like high grocery and housing costs, with no regard for hard data.

When political rhetoric gets loud, look at the basic math. First, consider gross domestic product (GDP). GDP is simply the total value of all goods and services a country produces in a given time frame. Think of it as a nation’s sales or revenue, just like a company’s top line. After a -0.6% growth rate at the start of the year, the second quarter rebounded with a 3.8% increase. New data this week showed third-quarter GDP growth accelerated to 4.3%—the highest rate in two years. Historically, real GDP growth above 3% is outstanding. Real GDP—check.

Unemployment currently sits at 4.6%, the highest since 2021. But let’s add context: Since 1950, the average U.S. unemployment rate has been about 5.7%. In 2020, it spiked to 14.8%. By any historical measure, if you want a job in America today, the numbers are on your side. Employment—check.

Next, interest rates. The Federal Reserve recently set a target range of 3.5% to 3.75%. Historically, 30-year mortgage rates run two to three percentage points higher than that, and they’re now around 6.3%. We’re in a cooling-off period after mortgage rates peaked near 8% in late 2023. If you’re anchored to the sub-3% rates of 2020—a once-in-a-century anomaly—6.3% might not feel great. But the historical average since 1971 is 7.4%. Compared to the last five decades, we’re borrowing at low rates. Interest rates—check.

Finally, the annual inflation rate is currently around 2.7%, above the Federal Reserve’s 2% target but well below the 75-year average of 3.5%. Remember, the COVID-era high was 9.1% in June 2022. Inflation still “feels” bad because two bags of groceries can cost $150 and due to what’s happened over the past five years. Prices aren’t dropping, but the speed of their increase has slowed significantly. We’re still paying for the 24% total price hike since 2021, but the upward spiral has stopped. At 2.7%, the economy is cooling to a healthy temperature. Inflation—check.

The bottom line: Despite the “vibecession” narrative, the economy is recovering. I think we deserve an A-minus, no matter who the grader is—Democrat or Republican.

One last point. Who drives all these metrics? Certainly not politicians. It’s small-business owners. They create the jobs and the growth. A healthy economy is built by small businesses. They generate about 65% of all new jobs and the vast majority of innovation. These businesses have been operating in a fog of mixed information and a rapidly changing policy environment. For entrepreneurs, predictability is oxygen—their lives are already upside down with risk. They need certainty to plan, hire, and invest. So, let’s not confuse the real creators. It’s time to move past the noise and get back to business. The math says we’re going to be just fine.