It seems as if we having been waiting patiently for the last two years for a recession to occur in the United States. When it did not occur forecasters often admitted that they were wrong but pushed back the downturn to occur in 2024. A few have said the economy will have a “soft” landing and there will be no recession in the foreseeable future. Whenever and whatever happens, the issue will be dependent on the behavior of the American consumer.
Since the mid-late 1970’s, the American economy ceased to be an industry dominant economy. Today, the consumer segment comprises 70-72% of the Gross National Product. So, as the consumer goes, so goes the strength of the economy (when I was a teenager, the saying was “as General Motors goes, so goes the nation.” How times have changed!)
Interestingly, the US economy and the consumer has been defying predictions for the longest time in my recollection. Very few media outlets seem to say that trouble is brewing. The more conservative outlets tend to say that President Biden is in trouble as the economy is not very good at all. They say this despite the fact that the unemployment is at a 40 year low and inflation has cooled from 9.1% some 18 months ago to approximately 3.2% today. Their attack seems to be more political than fact based.The more liberal media tend to say things are great.
As you might expect, I do not see things either way. Recent polls from both CNN and Marist indicate that Americans feel that they are doing okay but the economy itself is not good. Some of this seems to be driven by the reality that many Americans are not pleased with the idea of the choice of either the current president or former president in November, 2024 so they say that things are not going well. Here is where I come out on the entire issue. The media need to focus on some facts. I see cracks in the economy but they have not surfaced in a big way yet. For example:
1) today, the median income household is paying 41% of take home pay for their mortgage payment. This the highest level since 1984.
2) Credit card balances are going up as are delinquencies in payment each month. This is not good news. If it stops inching up and moves higher faster, the economy has to sag.
3) Another bellwether is the rise in delinquencies on auto loans, particularly with purchases of used cars.
4) The US savings rate is down to 3%.
Clear data will not be available for months, but it appears that the top quintile (20%) of the households are doing great. And, for the first time in my life, the bottom 20% is in better shape than normal due to very low unemployment and strong raises for many low wage workers in the last year or two. The middle quintiles seems to be where the real stress is. They received a lot of cash during pandemic relief but that is now gone. Many engaged in “revenge buying” when the pandemic subsided and are now feeling the squeeze as bills come due. Also, student loans payments are back which is difficult for many young adults to meet.
Maybe the goldilocks economy will continue for another year. My wish is that the talking heads on business media focus on the consumer and keep us far better informed than we are now.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
