It’s The Economy, Stupid!
Remember that? It was said in 1992 by James Carville, Bill Clinton’s chief campaign strategist. It helped Clinton win the presidential race. And it’s no less true today than it was in 1992. Its power was a big factor in George H. W. Bush’s loss in the election.
Today, our economy seems quite fragile. In many ways the impact of Covid-19 has had a major negative impact on the economy but, thus far and thankfully, not as severe as the depression of 1921 (see my article 1921).
Now I don’t know about you, but what I hear politicians say and what I hear in much of the national news doesn’t seem to align with what I see firsthand and what I see reported elsewhere in print and online. Here are some stories and statistics that may paint you a less rosy picture.
The government touts the low unemployment rate (last U3 rate released was 3.4%), but that only measures the rate of people actively looking for work. The labor participation rate is 1% less than it was in February of 2020. Each tenth of a percent equals 160,000 people so over 1.6 million people have left the workforce since Covid. If those workers had stayed in the workforce, the unemployment rate would have been 4.6%. Admittedly, this is still a low rate but the 3.4% quoted with no context really overstates the economy’s strength.
According to the latest Bureau of Labor Statistics (BLS) report, there were over 8 million workers who worked part-time because they could not find full-time work.
Also, according to the latest BLS report, over 4 million workers worked more than one job, either full time with one or more part-time jobs or multiple part-time jobs.
According to Bloomberg, “Even on $100,000+, More Americans are Living Paycheck to Paycheck.”
In the first nine months of 2022 approximately 450,000 homeowners who financed their mortgages through FHA in 2022 owe more than their homes are worth.
Americans are falling behind on their credit card payments; 46 percent of credit card holders do not pay their full balance each month. With record high credit card interest rates, currently an average of 19%, delinquencies are increasing.
According to TransUnion, auto loan delinquencies (60 days or longer) was at the highest rate since February 2009.
Banks are tightening the lending standards for consumer loans. If folks can’t get loans, they’ll stop making big ticket purchases like cars and home appliances.
Layoffs have been accelerating. In 2022 more than 140,000 jobs were cut. The rate of layoffs is accelerating: so far in 2023 over 93,000 workers have been laid off. Of course, many of these workers will get other jobs, especially in the tech sector. But these layoffs will begin to contribute to a recessionary contraction. Even NPR is cutting workers.
I saw this headline recently: Is the US facing a retail apocalypse? More than 800 big box retail stores are set to close across the nation this year - including Bed Bath & Beyond, Walmart, Gap and Party City
As of last October, 37% of small businesses were delinquent in their rent.
A lot of doom and gloom. Sorry.
So, what do we do? That’s a question that I don’t have an easy answer for. Pay attention to your investments and try to avoid risky ones since those companies could be the first to go bankrupt. In an inflationary market, debt is your friend so be careful about prepaying mortgages and car loans. Try not to keep too much cash, as over time cash becomes less valuable with inflation.
If you’re still uncomfortable, talk to your financial advisor or accountant. They’ll know your personal situation and do a better job than I could here.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
“Say what you mean, mean what you say, don’t say it mean”
- anon
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Marty makes a break!
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~