the answer to "are things really that bad" is easy.
Yes it is that bad!
If the crappy economy does not personally effect someone they tend to think that everything is ok, Maybe not great but not as bad as whats being made out. If someone's lot in life has shifted on account of job loss and or under-employment then things ain't quite so rosy.
The job market sucks and prices on items people must have are spiraling. So we catch hell from both ends, income loss and increased expenses.
I consider myself lucky, I lost a job and got a new one in less than an hour, pay loss of course, benefits gone, but at least I can cover my nut every month.
There are hundreds of thousands out there who are nowhere near so lucky.
Things are pretty bad. What's worse is there is no way to fix it.