Best economics degree? Harvard PhD or Western Kentucky BSc?
Miran (PhD, Harvard): economy “marching on ahead”. Scanlan (BSc, WKU): “downturn”.
Source: https://twitter.com/kylascan
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The preliminary Index of Consumer Sentiment (ICS) reading for May shows the US economy in vibecession with ICS down -26% since January.
The question now: is a recession coming? Or will it be a no-recession vibecession?
Kyla Scanlon, who invented the “vibecession” concept in 2022, says that this time it will be not just a vibecession, but a real economic downturn.
Trump’s Council of Economic Advisers Chair Stephen Miran sees the economy “marching on ahead” despite falling consumer sentiment.
Scanlon (BSc, Western Kentucky) built her reputation as an influential economist in the public sphere with her vibecession call in 2022.
Miran (PhD, Harvard) was part of the economic forecasters’ consensus wrongly calling recession in 2022.
Can Miran redeem the honor of Harvard Economics by getting 2025 right?
Just a vibecession and not a recession?
The preliminary reading of the Index of Consumer Sentiment (ICS) shows May 2025 as the 5th consecutive month with falling consumer vibes. May ICS is down -3% from April and down -29% since President Donald Trump took office in January.
To guard against the possibility of random “survey blips” in the monthly data, I average ICS over the past 3 months to judge whether the US economy has fallen into what Kyla Scanlon calls:
“Vibecession - a period of temporary vibe decline where economic data … are relatively okayish.”
(From this point on, all my references to ICS data are to 3-month averages. Also note that I use adjusted ICS in my calculations to be comparable to historical data before University of Michigan moved to a new ICS survey methodology in April 2024. My adjustment does not materially affect the % changes in ICS readings since the methodological change was fully implemented in July 2024.)
I define “vibecession” numerically as a period when:
ICS (3-month average) falls by -20% or more. AND
The National Bureau of Economic Research (NBER) does NOT issue a subsequent call that an economic recession occurred either during the period of ICS decline or within 12 months after ICS hits bottom.
Using 3-month averages for ICS, consumer vibes are down -26% since the recent peak in January 2025. The US is either:
in a no-recession vibecession, similar to what happened from the summer of 2021 to summer 2022, or
in (or on the way to) an economic recession with falling jobs and incomes.
Stephen Miran, chair of the President’s Council of Economic Advisers and the brain behind Trumponomics, made the case against recession after ICS fell sharply in March of this year.
“I just don’t think that there’s been a very strong correlation between the confidence data and actual consumer spending in recent years … the economy is marching on ahead.” CNBC, 2025-3-25
Miran didn’t use the word, “vibecession”, but that’s what he was saying.
Two months later, consumer vibes are still falling, but some economic data continue to show that “the economy is marching on ahead”. While unemployment was up to 4.2% in April from 4.0% in January, there has been good job growth every month this year. As for inflation, the annual rate is down to 2.3% in the most recent report for April 2025 from 3.0% in January.
The misery index was already low at 7.0 (= 3% inflation + 4% unemployment) in January when Trump started his 2nd term — the best misery index inherited by a new president since 1953. The latest misery reading for April was even better at 6.5 (= 2.3 + 4.2) – the lowest misery index in more than 5 years.
The Bureau of Economic Analysis did report that the value of activity (as measured by Gross Domestic Product or GDP) fell at an annual rate of -0.2% over the first 3 months of 2025 after adjusting to exclude inflation. But, that report is NOT a sign that Miran was wrong to say “the economy is marching on ahead.” Ben Casselman did a good job explaining in the New York Times why the preliminary GDP figure for the 1st quarter may have been subject to estimation problems particular to the unusually large surge in imports induced by Trump’s tariff threats. GDP estimates may not provide a good picture of what’s happening in the US economy until the 2nd half of 2025.
With consumer vibes plunging while the economic data still look good, there is a case to be made that the 2025 economy is unfolding as a sequel to the no-recession “vibecession” of 2021-22. Consumer vibes fell -38% from June 2021 to August 2022, but no recession ensued.
Or is the US economy entering recession?
Kyla Scanlon, the originator of the “vibecession” concept, disagrees with Miran’s view that “the economy is marching on ahead”. Interviewed in April, she said:
“Consumer sentiment is dire. People are not feeling good because underlying economic data is showing signs of strain … What people are feeling is not just vibes … there’s real data to support a downturn … the sentiment is warranted”
Beneath the favorable topline numbers, Scanlon worries about “a weakening labor market and lingering inflation [and] recession calls”.
Who’s right – Miran or Scanlon?
In politics, there’s no doubt that Miran is to the right.
But, who will be correct about the US economy in 2025 — Miran or Scanlon?
I don’t have the expertise in economic forecasting to offer an educated opinion. All I can say is Scanlon was right in 2022 that the US was experiencing a “vibecession” with “relatively okayish” economic data except consumer vibes.
And, Dr. Miran was wrong when he wrote in September 2022:
“we expect that the economy is likely to slide into a full recession, likely around the turn of the year”
Miran was wrong. Scanlon was right. In 2022, the US was in a vibecession, not a recession. Not only was there no economic recession in 2022, there was no recession in 2023 — or in 2024.
What do past vibes and recessions say about 2025?
I attended a good, but not elite, university – Western Ontario in Canada – and I do not have a PhD. So, I can’t help enjoying the David-and-Goliath overtones of Scanlon v. Miran. Kyla Scanlon (BSc, Western Kentucky University) called the US economy correctly in 2022 and coined a concept, “vibecession”, that may make its way into economics textbooks. Stephen Miran (PhD, Harvard) got the US economy wrong in 2022 in an opinion article that would otherwise be forgotten were he not now one of President Trump’s optimal tariff whisperers.
Of course, just because Scanlon was right and Miran wrong about the US economy in 2022, there is no guarantee that Scanlon will be right in 2025 that we’re headed for a “downturn” and Miran will be wrong with his “economy is marching on ahead” call.
However, there has been a good-but-not-perfect fit between large consumer vibe downturns and recessions. Since University of Michigan began compiling the Index of Consumer Sentiment (ICS) 73 years ago in 1952, NBER has declared 11 US recessions.
ICS has fallen before and/or during all 11 recessions by at least -10% each time.
The ICS record since 1952 tells us that a fall in consumer vibes is an indicator that a recession MIGHT be under way or on the way, but is NOT a sure sign of recession.
There can be no certainty about recession even when the fall in economic vibes is as large as we have just witnessed with ICS down -26% in the 4 months since President Trump’s January return to the White House. While ICS has fallen at least -10% in all 11 recessions, there have been 8 other episodes when vibes declined at least -10% with no recession ensuing. In other words, falling consumer vibes predicted 19 of the past 11 recessions, if I may borrow Samuelson’s oft-cited observation of the stock market.
Wall Street indexes predicted 9 out of the last 5 recessions! (Newsweek, 1966-9-16)
However, when I restrict analysis to “large” falls in consumer vibes, a clearer pattern emerges. The -26% fall in ICS since January marks the 8th time that consumer sentiment has fallen by -25% or worse in the past 73 years. 6 of the 7 prior instances were accompanied by an economic recession. It’s not statistical science, but I can’t help observing that the historical record provides circumstantial evidence supporting Scanlon’s “downturn” call. 85% of the time when consumer vibes suffered such a steep fall, there was a recession.
Caveat lector
I must admit that, if I submitted 6-of-7 prior episodes as supporting evidence in a statistics essay, any Harvard professor ( let alone any WKU professor) would fail me. If I said in statistics class that, because the score was WKU 1 Harvard 0 when Scanlon and Miran called the US economy in 2022, the same thing is bound to happen in 2025, I would be advised to drop the course.
I do recognize that Harvard is one of the elite institutions that made the US the great country it was up until November 2016. I would ask any Harvard graduates, who read this post, to not take offense and take my jibes at Harvard in the spirit of good fun.
And, I meant no disrespect to Dr. Stephen Miran’s achievement earning a PhD in Economics from Harvard. I acknowledge that Harvard Professor Kenneth Rogoff defended Dr. Miran as a “very good” economist and that Financial Times reporter Eammon Sheridan recently complimented Miran as “not a dummy”.