Hi y’all —
When I was young, I loved the TV show Zoom. If you've never seen it, you should definitely look it up: An SNL-style cast of kids hosts a variety of segments centered around everything from relay races to science experiments. Zoom was colorful, fun and energetic, but the factor that made it stand out to me was Ubbi Dubbi.
Ubbi Dubbi was the fictional language Zoomers used. It's both cool and easy to speak; all you do is add "ub" before every vowel sound. ("Dollar Scholar," for instance, would translate to "Dubollubar Schubolubar.")
Now that I'm an adult, I realize Ubbi Dubbi is not that complicated. But watching Zoom as a preteen, I could barely understand what the cast was talking about.
For me, Ubbi Dubbi was unintelligible back then in the way much economic chatter is now: Words like "soft landing" and "hard landing" are flying around, and I have no idea what they actually mean — or whether I should care.
Why is everyone talking about a soft landing?
Jadrian Wooten, an economics professor at Virginia Tech, says in order to answer that question, we have to go back to 2020.
As you likely remember, the U.S. economy cratered when the pandemic hit. Millions of people lost their jobs, so the government frantically approved stimulus checks and expanded unemployment programs to put money in their pockets. Add in the fact that Americans all but stopped spending on entertainment — COVID-19 meant no movies, no parties, no fancy vacations — and many households actually ended up saving a significant amount of cash.
The issue? Once the lockdowns lifted and vaccines launched, we collectively “overcompensated,” Wooten says. People went to more movies, threw bigger parties and planned fancier vacations. Americans put their pandemic savings to work, spending more than normal at a time when they were also earning more than normal.
The result of this was runaway inflation in 2021 and 2022 — a problem that the Federal Reserve was tasked with solving. Because the nature of the economic crisis was unlike anything the U.S. had ever experienced, officials “didn’t really have a playbook of how to do this,” Wooten says.
Basically, the Fed had a choice. The central banking system could take drastic action and bring down inflation rapidly, or it could move deliberately and chip away at it. Afraid of making things worse by overdoing it, the Fed opted for the latter.
“The ‘landing’ is a plane metaphor,” Wooten tells me. “They didn't want to crash the economy by going too fast.”
The Fed’s primary tool is the federal funds rate, or the interest rate at which banks lend each other money overnight. By raising and lowering this rate, the Fed indirectly controls personal spending. (When the federal funds rate is high, borrowing money — aka getting a mortgage, carrying credit card debt, etc. — is more expensive, so people spend less. When it’s low, the reverse is true.)
A soft landing, therefore, is a scenario in which the Fed gradually raises rates enough to slowly cool inflation to an acceptable level of about 2%. A hard landing, where rates are yanked up so quickly that employers slash jobs, amounts to a recession.
These aren’t scientific terms; Wooten says they’re just terminology experts use to talk about the economy. And there’s no consensus on exactly which way things are going right now.
