People just aren't making enough money to continue buying things the way they once did, especially as cheap and easy credit becomes a thing of the past. Savings accounts are draining as consumers struggle just to make ends meet, and still the numbers are dismal.
Over the past four months, consumer spending, the engine of the American economy, has done nothing but fall. Spending on rent, bills, and haircuts ran flat in December – and after adjusting for inflation, it actually declined to the worst monthly reading in almost a year.
Existing home sales fell all last year to their lowest level since 2014 amid rising mortgage rates. And the auto industry isn't doing any better as the sales dropped to their lowest level in more than a decade.
Things seemed to be picking up in early 2020 amid the issuance of "covid" stay-at-home orders and the release of multiple stimulus checks to help keep the fiat economy going. This led to increased spending and increased savings – but no longer.
"Faced with four-decade-high inflation last year, Americans outspent it," reported The Wall Street Journal about last year's economic conditions. "Through most of 2022, consumer spending growth exceeded price increases by about 2 percentage points."
"Now the forces that helped keep spending high are unwinding, while inflation remains elevated. The share of monthly income Americans set aside for savings was 3.4% in December, down from 7.5% a year earlier and from a record high in April 2020. Credit card interest rates have been rising, and Federal Reserve officials have signaled that they plan an additional quarter-percentage point increase to the central bank’s benchmark rate this week. That would bring the rate to between 4.5% and 4.75%, from near zero at the start of last year."
(Related: Rising interest rates and skyrocketing inflation are driving many to flee America's big cities in search of greener pastures.)
During the height of covid, consumer savings reached epic highs. Now that covid is over, consumer spending has plummeted while inflation has increased. This is a really bad combination for continued economic subsistence.
Accounting for roughly 70 percent of the economy, consumer spending is an important part of what keeps America afloat. Without it, the economy will crash, which is exactly what seems to be on the horizon.
Unemployment is said to be at a half-century low, but major corporations like Amazon, Goldman Sachs, and Microsoft are laying off tens of thousands of people. Something is really not right.
Employers are not keeping their temporary workers for very long anymore, and employees who lose their jobs are taking much longer than normal to find new ones. The average number of hours worked in a week is also declining, according to the Department of Labor.
"The last bastion of strength is the labor market, but I don't think it can withstand all these other forces," said Nationwide Chief Economist Kathy Bostjancic about the current situation.
Mortgage rates, meanwhile, reached a 20-year high last fall. This bumped the percentage of consumers concerned about making their house payments to 57 percent in the fourth quarter of 2022, up from 48 percent in the third quarter.
"We're probably going to have higher interest rates around for quite a while," said Harvard University economist Kenneth Rogoff. "You would think eventually that would dampen consumption, although that we haven't had the full effect yet."
The latest news about the dire state of America's economy can be found at Collapse.news.
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