The American economy continues to stumble along, doing better than expected at the macro level, while hurting working Americans at the micro level.
Inflation continues to loom large, despite October’s numbers beating Wall Street’s expectations; interest rates are at near record high levels, the housing market is a trainwreck, and credit card debt is at all-time highs.
Yet, for some reason, the Biden administration continues to give speeches touting the strength of the economy, touting Bidenomics. However, it isn’t resonating with voters.
A recent poll shows that just two percent of voters in “six battleground states said the economy was excellent. More than half of voters under 30, Hispanics, women, and people in every income bracket say they trust former President Trump to handle the economy more than Biden.”
Inflation continues to remain higher than the Fed’s goal of 2.0 percent.
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI), the most common measure of inflation, increased 3.2% in October 2023, versus September 2022. While the CORE CPI, which excludes more volatile variables such as fuel and food, was 4% higher. What is lost on the majority of talking heads on financial television is that the CPI in October 2022 was 7.7%, meaning that prices today are nearly 11% higher than they were in 2021. While this is lost on the talking heads, it isn’t lost on working Americans who are trying to put food on the table and gas in their trucks.
Given high inflation and declining real wage rates, “the Bureau of Economic Analysis recently revised its previous estimates to show household disposable income was lower and personal consumption was higher than previously reported.”
American families have lost $7,000 in spending power during Biden’s presidency. Given that the average American family earns $71,000 per year, this is a significant loss. Perhaps this is why so-called experts are forecasting a sluggish holiday season, per CNBC. People simply do not have the money to spend on holiday gifts.
More significantly, people are having to dig into their savings and their retirement funds to pay for basics. Nearly 33% of Americans have less than $100 in their savings accounts. Only 40% of Americans can pay for a $1,000 emergency expense. Emergency 401K withdrawals are up 27% this year.
In addition, we are seeing credit card debt reach record levels, surpassing $1 trillion. A recent Clever Real Estate survey found that “3 in 5 Americans (61%) are in credit card debt, owing an average of $5,875. In addition, 23% say they go deeper into credit card debt every month and 14% say they’ve missed a payment in 2023.”
People are not incurring debt to go on vacations or purchase new televisions. They are incurring credit card debt to purchase necessities such as groceries, pay rent, and utilities.
It isn’t just credit card debt that is dragging the economy down. The housing market is stuck in the doldrums. Homebuilder sentiment is at a 10-month low, as mortgage rates are kissing 8.0 percent.
Housing prices remain steady due to a lack of inventory. People with mortgages at 4 percent or less are not selling. The only reason we have not seen a collapse of the housing market is that Americans learned their lessons from the housing collapse in 2008, and the number of variable rate mortgages is negligible, representing only 9.2 percent of mortgage applications in the last week of October.
However, we are seeing more and more people back out of agreements to purchase a home. The percentage of home purchase cancelations reached 16.3 percent in September, which represents 53,000 canceled agreements.
Meanwhile, home foreclosures are up 34 percent year over year, with more than 150,000 homes in some sort of foreclosure procedure last quarter. It isn’t just housing and credit cards; automobile repossessions are now up more than 20 percent.
President Biden can continue to run for reelection on the strength of Bidenomics. But the American people are hurting, working harder than ever to fall further and further behind.