Aug
US consumers are increasingly anxious about falling behind on their financial obligations, with expectations of delinquency reaching their highest point since the onset of the COVID-19 pandemic. A recent survey by the Federal Reserve Bank of New York, released on Monday, reveals that the average likelihood of missing a minimum debt payment over the next three months has risen to 13.3%. This figure represents the highest level since April 2020 and reflects growing financial stress among the population.
Financial Stress Disproportionately Affects Lower-Income Groups
The survey highlights that financial anxiety is most severe among individuals earning less than $50,000 annually and those with a high school diploma or less. These groups are experiencing the greatest increase in stress regarding their ability to meet debt obligations. Additionally, perceptions of credit accessibility have worsened compared to a year ago. Expectations for household spending growth have fallen to their lowest level in over three years.
Mixed Views on the Labor Market
Workers’ perspectives on the labor market present a mixed picture. Although Americans are less worried about job loss and higher unemployment rates over the coming year. There is a growing belief that finding new employment after becoming unemployed will be more challenging. This sentiment aligns with recent economic data, which suggest a weakening labor market.
US Economy Slows Down After 2023 Boom
After an impressive surge through 2023, the US economy is now transitioning to a more subdued pace. Companies are hiring fewer employees.
Labor Market Trends and Economic Data
The broader economic landscape reflects these concerns. Hiring activity slowed in July, and the unemployment rate unexpectedly increased to 4.3%, marking the highest level in nearly three years. A separate report from the New York Fed last week indicated that new delinquencies on auto loans have reached their highest levels in at least a decade. Similarly, new delinquencies on credit card debt have also reached their highest levels in the same timeframe.
Federal Reserve’s Focus Shifts
In response to the cooling inflation and a softening labor market, Federal Reserve officials are now prioritizing employment. Policymakers have maintained the benchmark interest rate at a two-decade high for over a year. However, they have suggested that they may begin reducing borrowing costs as early as September if inflation trends continue downward.
Inflation Expectations Remain Stable
The Survey of US Consumers Expectations also showed that short-term and long-term inflation expectations have remained stable. The median one-year inflation outlook held steady at 3%, while the five-year forecast remained at 2.8%. However, the expectation for inflation over the next three years dropped by 0.6 percentage points to 2.3%, the lowest level since the survey began in 2013.
Boost your market strategy with a year-long subscription that merges Barron’s and WSJ Print Edition expertise. Benefit from fast three-day delivery, 24-hour digital access, and flexible adjustments. Enjoy seamless renewal and comprehensive global market insights for a year of financial success. Subscribe today.
US Consumers.
