‘It is uplifting to see a spirit of resilience amongst the American population,’ said Mike Fanning, head of MassMutual U.S. But is it realistic?
Unemployment is falling, even as the tech sector is shedding jobs. And most Americans say they remain confident about their job security and the broader economic outlook, even as the economy is slowing, the stock market remains tumultuous and interest rates continue to rise.
Consumers appear to have stars in their eyes. Fewer Americans today believe the U.S. is in a recession compared with last November , according to MassMutual’s Consumer Spending & Saving Survey released Tuesday. The survey was conducted last month among 1,000 U.S. adults. “There are a lot of conflicting economic indicators right now,” said Ted Rossman, senior industry analyst at CreditCards.com. “I think this speaks to the K-shaped economy. People with lower incomes and lower credit scores are being hit hardest by inflation and rising rates.” He continued: “There’s also the question of leading indicators versus lagging ones. The job market, historically, has been more of a lagging indicator. It’s also really important, of course, as employment status tends to be the biggest predictor of whether or not someone is able to pay their bills.” Many of those polled by MassMutual also reported feeling increasingly confident that a potential recession would not adversely impact their day-to-day finances, compared with last quarter . This sentiment, however, is largely driven by older generations. Some may be puzzled by how optimistic Americans seem to be. Others see it as a sign of U.S. confidence. “It is uplifting to see a spirit of resilience amongst the American population, despite a softening in the U.S. economy and corresponding financial uncertainty,” said Mike Fanning, head of MassMutual U.S. “Staying vigilant by practicing sound financial habits is key to navigating this stubborn inflationary environment,” he said. “Consumers who have already taken steps to save and invest wisely may be best positioned.”As MarketWatch reporter Jeffry Bartash noted when the annual U.S. consumer-price index slowed slightly to 6.4% in January: If inflation gets stuck well above the Fed’s 2% target — at 4% to 5%, for instance — the central bank could raise rates even higher than planned and keep them there for quite some time. Consumers show signs of pulling back But consumers are already showing signs of pulling back. More than half of Americans told MassMutual that they’re delaying purchases due to rising inflation, although fewer say they’re doing so compared with last November . The most common purchase being delayed? Automobiles. In fact, car manufacturers said they sold 13.9 million vehicles in 2022, down 14% from the prior year, due to a shortage of automobile parts, despite increased demand for new vehicles. It was the lowest annual sales figure since 2011, when the economy was still reeling from the Great Recession. There are many other “all news is local” components to economic data, Rossman added. “The technology and media industries have been hit harder by layoffs than other sectors,” he said. “But even there, we see evidence that people are finding new jobs relatively quickly in most cases.” The job market is not a monolithic beast. More than 123,000 global technology-sector employees have been laid off since the start of 2023, according to Layoffs.fyi, as Silicon Valley sheds millions of jobs added during the pandemic. And yet U.S. unemployment remains low, at 3.4%. And although housing prices typically vary widely from city to city and state to state, with interest rates and prices remaining high, home sales fell for the 11th straight month in December. But given the double-digit percentage increase in prices over the last three years, the price drops thus far are relatively minor. “The housing market entered recession in 2023,” a report from Moody’s Analytics said last week. House prices peaked in July and have fallen 2% since then. But to put that “recession” in context: Prices rose more than 35% between the beginning of 2020 and mid-2022, according to Realtor.com. Economists are puzzled and divided All of the seemingly conflicting data appears to have puzzled and divided economists. The National Association for Business Economics released its own findings last week, which showed that a majority of economists said the U.S. had a 50/50 chance of entering a recession. The lack of consensus is one consistent outcome. The poll’s results reflect “significant divergence regarding the outlook for the U.S. economy,” said NABE President Julia Coronado, who is also president and founder of MacroPolicy Perspectives LLC. One critical question mark hangs over economists, according to the survey: They are unsure how high the Federal Reserve might raise interest rates, how long they might remain at their peak and when the Fed might reduce rates. The stock market remains highly sensitive to any moves or signals by the Fed. The economists were also split over the questions of if or when a recession might hit the U.S. and how severe such a recession might be. Some 28% said they expected it to arrive in the first quarter of 2023, 33% cited the second quarter and 21% said the third quarter. The long-term impact of China’s reopening and the ongoing ramifications of Russia’s war in Ukraine remain big international outliers when it comes to global inflation. In January, China, the world’s second-largest economy, reopened its borders and abandoned its pandemic-era quarantine and other zero-COVID measures. Still, macroeconomic data and geopolitical events can often obscure what’s happening in households, CreditCards.com’s Rossman said. “That definitely happens in the credit-card industry. Delinquencies and the debt-to-income ratio are below historical norms, even as delinquencies have been ticking up in recent quarters.” Wisely or not, Americans are still spending. “We’re currently seeing record-high credit-card balances and record-high credit-card rates,” Rossman added, “yet roughly half of cardholders pay in full each month and reap many benefits from their credit cards, such as free flights, cash back, airport-lounge access and more.” “We’re seeing the release of pent-up demand that stacked up during the pandemic,” he said, along with “some excess savings on households’ balance sheets — especially those with higher incomes — lingering supply-chain imbalances and changes to where and how people work. Interesting times, for sure.”
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
An earnings recession seems inevitable, but it might not last longThe companies that make up the S&P 500 index appear to be running head-on into an earnings recession.
Read more »
Bank of America CEO sees U.S. technical recession in 3rd qtrBank of America Chief Executive Officer Brian Moynihan said on Tuesday the U.S. economy would reach a technical recession starting in the third quarter.
Read more »
Good and bad news about your savings and a possible recessionAre we headed toward recession? If you’re worried about the impact that a recession could have on your savings, here are some things to consider.
Read more »
Salesforce's Benioff expects painful recession after market chaosSalesforce CEO Marc Benioff is bracing for a brutal recession - and says he was blindsided by the market chaos last year
Read more »
WATCH LIVE: Fed Chairman Jerome Powell addresses Senate amid inflation and recession concernsThe Senate Committee on Banking, Housing, and Urban Affairs is set to receive the Semiannual Monetary Policy Report to Congress from Federal Reserve Chairman Jerome Powell.
Read more »