To test an assumption, I googled, "how strong is the us economy?". The first page of results read that the US economy, "continues to soar", "grew at a surprisingly strong pace", "is powering ahead", etc. I was validated in my assumption that the googles have the googilies for the US economy so I wanted to grab other available and current observations to see if there are other signals in the data that could possibly betray the googles. Here is what I found.
The American economy is resilient despite an unending series of self-inflicted injuries.
Debt
Americans' credit card balances climbed by $212 billion in the fourth quarter of 2023 to a new record high of $1.13 trillion.
Credit card delinquencies increased by over 50% and across all age groups
Borrowers between the ages of 30-39 are missing their credit card payments at especially fast rates, reverting to levels worse than before the pandemic and still rising
The rate that mortgage loans are becoming troubled is relatively unchanged, however borrowing through home equity lines has increased for the seventh straight quarter
Luckily, we have a government that wants to help. Our elected representatives handed out $4.6 trillion in pandemic/lock-down assistance and canceled $138 billion in student loan debt so far.
21% of Americans have no savings, while 20% say they have less than $1,000 in their bank accounts
Half of all renters say they can’t afford their rental payments
More than half of US adults between ages 18 and 24 lived with their parents in 2023
Homelessness has grown to an all-time high of 653,100 people by January 2023
Janet Yellen famously stated, “Well, we don’t have to get the prices down because wages, wages are going up.” The problem is, when adjusted for inflation real wages have fallen consistently since January 2021.
Scree: The rise in delinquencies happening while the economy is growing is worth keeping a close eye on because it does not appear to be a deep and resilient kind of prosperity. A moderate slowing of the economy with a turn in employment rates would likely send delinquencies over the edge causing a credit squeeze. This is about all you would need to start bit of an economic slide.
It rhymes: Zooming out a bit, the Magnificent 7” continues to outperform the rest of the S&P index, accounting for 45% of gains to start the year. I was around for the dotcom bubble and as they say, you always remember your first and this one bears a strong resemblance. The current concentration of performance and value in this market is nearing its highest level since 2000. The number of sectors represented among the S&P’s top 10 most valuable companies is even less diverse than it was during the peak of the dotcom bubble. Already in 2024, 20k tech employees have lost jobs due to layoffs (layoffs.fyi). Job postings are down 15% from last year, including a 31% drop in finance roles and 44% drop in software development roles, per Indeed.
Again, I am optimistic nearly to a fault and these are merely data points. I just recommend keeping light on your feet should these develop into something more significant.
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