I'm Audie Cornish, and this is the assignment. All year long, the economy has felt like it's on the brink of something. And if our social media feeds are any indication that something doesn't sound good.

I literally paid like maybe 30, 40 bucks and now it's like $75 for like three bags of groceries.

Does anybody else have $8 to their name until payday in 10 days, or is that just me? Am I doing this wrong? Please help.

That's why I can't shop at Walmart now. $8.92 for frickin' chips? Are you kidding me? $20 for coffee?

And now we've hit that time of year when wallets tighten, the pressure ramps up, and the general vibe seems to be.

Budget, budget, budget. You need a plan. Also remember, adults don't need gifts, okay? Focus on the people in your life who are age three to 18. Grandma doesn't need slippers.

But skimping on grandma doesn't exactly match the message coming out of the White House.

Grocery prices are way down, energy prices are way down. Mortgage rates are down.

So here we are trying to read the tea leaves, watching everyday recession signals pop up all around us while the official numbers keep telling us that things are steady, even good. It's created this strange, tense moment where the data and the vibes don't match and the economy looks strong and shaky at the same time. So as we head into the holidays with all the stress and spending that can bring, how are we supposed to navigate it all? Well, we're gonna have some answers. Stay with us.

Allison Morrow is here. She's the senior writer for CNN Business, and she covers a wide range of topics, including financial markets and the U.S. Economy. Allison, welcome to the show. Thanks for being here.

Thanks so much, Audie. It's great to be here.

So one of the reasons why I wanted to talk to you because you wrote this amazing article, and I have to give writers credit where credit is due. The lead of the story said this. A collective Angst is taking root. Maybe you feel it watching the news, scrolling social media, standing in line at the grocery store, something's off. And maybe it's been that way for a while, but it hasn't always been this tense, right? And I was like, it's not just me?

'It's definitely not just you. This tension is felt I think you're seeing it in everyday consumers who have seen the price of groceries go up so much over the past five years that they're just tired and I think that really came to fruition in these off-year elections that we saw a couple weeks ago where the message was all about affordability and that proved to be a very strong and winning message for Democrats.

That's like the new catchphrase. Like the White House is using it, also people on the left are using it. And it's not that sassy a term, you know what I mean? It's not like, oh, it's the economy, stupid. It's very specific. What does affordability mean to you? And why is this current economy not affordable compared to past economies?

That's a really good point. I think affordability is the buzzword du jour in a sense because it can mean whatever you think it means in the moment. And it's been interesting to see the White House react to the elections with this sudden return to affordability because, you know, remember Donald Trump campaigned on Joe Biden's bad economy, right? Inflation was through the roof under Biden and everything's expensive. Housing's expensive, eggs were expensive, milk was expensive, and that was a really winning message for Trump. But now he's nine and a half months in, or nine, 10 months in now, and it's starting to come back to him. And it's like, well, you said you were gonna fix this on day one, and what have you done?

That's one of the interesting things. I was listening to the Treasury Secretary, Scott Besant, and he called those election results like a disaster. He thought what people were responding to was this sense that they don't have a stake in the economy. I think I've heard this a lot from the Trump administration, that they inherited this price problem. They inherited the affordability problem. And I want to talk to you about that because honestly, there were lots of times during the Biden administration where all they were saying is, look, the prices, it's not what you think. The economy is actually really good. And I don't blame people for feeling like, can we trust when the government says the economy is good, when we don't feel it?

'That's absolutely true. And the administration, Trump administration has a point when it says it inherited an affordability crisis. It did, like inflation has been coming down since it peaked in 2022. It was 9% in the summer of 2022. Now it's at a 3% annualized rate, which is higher than most economists feel comfortable with, but it's still a lot. And we talk about inflation and it's a kind of technical term, what people talk about what actual consumers talk about is prices. And Trump has kind of just lied and said prices are coming down. They're not. And that's just not how economies work. Like prices only ever go up. We just don't usually feel it because inflation is usually a little slower, like 2%. So prices are not actually coming down, and it's risen so fast that we all remember when our morning cup of coffee or filling our tank of gas. Cost less. It was just a few years ago, and we're feeling that fatigue really set in now. So the Trump administration has a point. It did inherit a crisis, but its policies and the trajectory that would have continued under a democratic administration anyway of this K-shaped economy where the lower rung of society is struggling and the higher rung is everything's great. Their policies have only amplified that, so tariffs have made things more expensive across the board, and that's difficult.

So, Allison, there are a couple people who, you know, they go online, it's the age of TikTok, they're able to still look down in their phone and be like, hey, folks, here's what I'm experiencing. And one thing I hear is pretty routine, and it sounds like this.

My favorite flavor of the Fresh Cravings, Hummus, $3.74, last year, July 1st, 2024. If I was to order it right now, $3.92.

Okay, tell me why this bell pepper is five bucks a pound. Five, it's a pepper, it doesn't drive itself home. Bread, 6.50, eggs, seven. I'm about to need a loan for breakfast.

How are we spending $1,200 in a month on groceries? This is unsustainable. How do we live like this?

Do you see those? Because you're a regular person online, so it must be weird to see people talking about the economy you're writing about.

From a business reporter perspective, it is really interesting because I can remember paying attention to econ data early in my career, and none of my cohorts cared. No one knew the inflation rate or the unemployment numbers, although we did during the Great Recession. Inflation was not as much of an issue. But inflation is one of those psychological problems that can take root in a society because everyone feels it. It's especially younger people who are more likely to post on TikTok who have limited income and who are feeling these price increases. If they want to buy coffee, they're going to have to figure out whether they go for the cheap stuff, go to the grocery store, stop going to Starbucks. Those coffee prices at Starbucks are not coming down. And that gets us back to the tariffs issue where Walmart, more than any other retailer. On the planet has the ability to both absorb the costs of the tariffs, which of course are paid by US companies and sometimes US consumers. Walmart can adjust its supply chains, it can absorb costs, it's got so much flexibility to avoid raising prices on consumers because that is its whole business model is we will undercut the competition, you will get a good deal here. And even Walmart has had to say like it's CEO in earnings calls early on has said, tariffs are ultimately going to force us to raise prices. And it might just be a little bit here and there, like the guy with 20 cent increase on hummus. But when you expand that across your entire grocery bill, it starts to add up very quickly.

I'm wondering about the unofficial signs. People jokingly, I say jokingly now, call these recession indicators. And everybody has their own indicators. There's like one for lipsticks. There's the hemline index, which is like how high people's skirts are over the years. CNN has a greed and fear index, just really leaning into the horror of all this. I appreciate that, appreciate you guys. But I'm also hearing about other things like people buying labubus or like what are the weirdest indicators of something's not right that you've been hearing?

Yeah, first of all, I will not pretend to understand labubus, that is, that's—

Oh, you're too cool for labubus, Allison Morrow?

No, I'm not too cool. I'm cool enough. I don't understand.

You're not cool enough for a tiny toy key ring. um...

They're very cute. I just I don't I've never

Are they? Or are they full body trolls and we've seen them before but the point is... They're the snackable economy Which I heard about right like we can only spend money on tiny luxuries

A lot of those, like the lipstick indicator, refer to items that feel like little luxuries. So when you're feeling stretched at the grocery store and all the things that you have to buy, your rent has gone up, your mortgage is expensive. When you're feeling strapped, customers seek out little luxuries like lipstick. I think that indicator has lost some of its currency over time, like as beauty brands have just. Exploded in the last few years but I'm not an expert on that. For me I think what's very interesting are the polarities that we're seeing.

What do you mean by that?

So on the one hand you'll have Chipotle for example just a couple weeks ago released earnings and it said our customers especially young customers 18 to 30, you know, they are pulling back. They're saying. $10, $12 burritos, that's too much of a stretch and they're pulling back. They're not paying extra for guac. All those little things, that might've felt like an indulgence. A lot of younger people and lower income people are saying no more, it's too of a much of stretch. Meanwhile, you've got a company like Apple that released a $230 iPhone sock with a designer.

'I want to make sure people heard sock. S-O-C-K, okay, which is supposed to be ironic and funny but is only ha-ha funny if you have the money to laugh.

'Right, and Apple is playing to a higher end luxury audience that might spend $230 on a purse that can only hold your iPhone. And they're buying into the Issey Miyake of it all, like the luxury designer that they partnered with for the sock. You know, the fact that we're talking about it means it's good marketing, I guess, but also it's a representative of the kind of two economies that are happening at once. You've got wealthy people and even like mid to higher range people who have exposure to the stock market right now, are feeling pretty flush and feeling pretty good. If their job is secure, then they're feeling a bit more confident. And then on the lower rung, people who are not exposed to the booming stock market are feeling really strained and those two movements are kind of happening in opposite directions and that's why they call it like economists love to call it the K-shaped economy. I also saw someone call it like the capital "I" economy because there's just like one rung at the top, one rung at the bottom, and like they're never meeting in the middle.

I'm speaking with Allison Morrow of CNN Business. We're talking about how to navigate this economy, the data we have, the data that we don't have, and what you guys are all thinking about it. Stay with us.

I want to play for you a clip from Tim Cadogan. He is the CEO of GoFundMe.

Essentials, which is groceries, rent, mortgage payments, car payments, has been increasing for the last three years. It's a phenomenon that is affecting really all of the developed economies.

I'm used to hearing about GoFundMe in the context of extreme expenses, right? Medical expenses. Something has happened to you. Now, he's talking about everyday essentials. And I'm wondering about this paired with the use of buy now pay later programs, which we've talked about on this show a lot, where people are using those for groceries and those for essentials. Like, are there red flags in these services? Moving from, I need help occasionally, to, I Need Help Monthly.

It's really concerning, not just for an armchair economist like myself, just regular economists I'm talking to say that is a huge red flag. The buy now, pay later programs are one of those things that tend to trap young people into debt spirals. And we're already seeing, not necessarily because of buy now pay later, but because of the precariousness of having a lower income, not having a lot of wealth built up right now, we're seeing loans default. We're seeing people fall behind on their payments.

And so car loan delinquencies are up, I think. Our credit card balance is higher as well?

'Yeah, so when we talk about consumer spending, we see, oh, consumer spending is strong or it's held steady. That's largely because higher-income people are still spending strongly. Lower-income people, are spending, but often they're doing it by loading up their credit cards. And that is another red flag.

I want to spend a little time on the part of the economy that is doing well, which is the stock market. It's doing well because of the vast investments that companies are making in AI infrastructure or companies that provide key parts to the whole kind of AI system and just the fact that there's just like a ton of money flowing into it, right, investing in the hope of this. And then, as I was preparing for this story. We saw reports that several like very big shot investors have pulled their money from companies that like do AI business. And now everyone's starting to be like, oh, what do they know that the rest of us don't know? Can you tell me like what the murmurings are? What's going on?

Sure. So it's really hard to overstate just how incredibly huge the investment into AI has been, not just this year, but in the past two and a half, three years. You know, chat GPT came out exactly, almost exactly three years ago, and it went viral and people were using it as a kind of new search engine. And that has just snowballed. This virality has gone to Wall Street and there there has been no kind of satiating investors in terms of how much money they're willing to put into these companies.

Yeah, it's like a mania, right? It's like, do you build data centers? I'll give you some money. Do you got some chips? I'll get you some. Like there's a little bit of like, I got to get in on the action.

Exactly, and that, you know, a lot of people have been using the B word bubble for a while to say, this feels like speculative investment with an unclear functional utility at the end of it. Like, what does the consumer product look like? How are people going to pay for it? What's the payout? How are we going to get the return on the investment? That question hasn't been answered. The return on investment is very murky, but investors have plowed money in anyway. So that is. Those are all like red flags for a bubble.

So finally, tell me what this means for the rest of us. I don't know if there's a concern that if somehow, let's just, if the AI bubble bursts for some reason, what it would really mean for the best of us, I don't know how to interpret some of these red flags, whether it be the Chipotle sails, you know what I mean, or anything else?

The smartest people I've talked to, who are analysts who understand the markets and the economy and how they interact, say, absent the AI spending, absent all the AI infrastructure building and Wall Street investment, we are in a recession, almost certainly. AI spending accounted for more than consumer spending in the first half of the year and consumer spending historically is the engine of the US economy

I was about to say so you're saying the market spent more on AI than the rest of us spent on literally anything else

Yeah, yeah. And that was Google, Meta, Amazon, they're spending hundreds of billions of dollars each year to build out these data centers in anticipation of this technological utopia. Absent that spending, if the bubble were to burst, and I will use the term bubble, although I think people can debate that, if the bubble were to burst. All of that spending goes away and what's left is an economy that is struggling at the bottom, as we've noted, and a lot of the gains at the top that we've talked about with people who are able to buy the iPhone sock. And another one is Delta announced that its premium cabins like first class and business class are filling up way more than ever before. I heard that. Yeah, so people are flying luxury and maybe they hadn't flown before, and a of that is because their net worth, which is attached to the stock market, has gone up. So they're willing to spend a little bit more. If that were to go away, it's not clear whether the consumer spending broadly in the economy would be enough to keep us out of a recession.

I feel like the story of the US economy and what we've told ourselves about how it works is like we're in a consumer economy. Like we buy things and when the going gets tough, we buy a little more. You know what I mean? Like terror attack, don't let the terrorists keep you from shopping. Like that is the mentality. Pandemic, buy things. Yeah, pandemic, please buy things, here's money to go buy things buying a house, that's your key. Education, gonna cost you a bit. Like, how is, how have these last couple years, are they gonna reshape how we think about how our economy should work, can work? Are we gonna start to maybe say things cost a lot? That's it. And we gotta think of a different way to have an economic engine.

'I would think it has to, I agree with you. I think the economics of our day-to-day lives just looks so different now. And it's not to say that the pandemic was everything, but it did massively shift and exacerbate a lot of inequalities that were present before, but now feel, like you said, people feel it's out of reach completely and that no amount of working toward it is is going to get them to this like promised land of wealth. And I think you are starting to see that. Like I know I'm in the lefty progressive enclave of New York City, and we just elected a democratic socialist mayor. But I don't think it's disconnected from sort of a broader national feeling that there is a systemic inequality happening and policy has to be in place to to address that, to even. Recognize it instead of telling voters, the economy is great, you know, Trump's message on affordability is that it's a con job by the Democrats. And, and actually, this is the best economy we've ever seen. It's not usually great to tell voters that their feelings don't matter and that they're misperceiving their own feelings. But that's his political problems to deal with. I do think that we're starting to see. Voters weigh in with their complaints and their grievances, and that is going to fundamentally shape the next generation of political leaders.

Allison Morrow, she covers financial markets for CNN Business, where she is senior writer. Alison, thanks so much for talking with us. Thank you for having me. Thank you so much for listening. We'll be back next week.