Elizabeth Renter’s Post

Growth in credit card balances has slowed. In fact, adjusting “revolving” balances for #inflation reveals consumers may have been putting fewer goods and services on their charge cards over the past few months. This could indicate a greater overall slowing in household spending, something that jives with recent consumer spending and retail sales data. Earlier today we also learned a greater share of middle-income households anticipate struggling with debt payments in the coming three months. This all supports the notion that more people are feeling pinched — stuck between high prices and high interest rates. Households that were previously spending more freely are being mindful of their discretionary spending now. Even when rates do start to come down, they’ve got a ways to go before they’re in comfortable territory. It takes time for high interest rates to have broad economic impact, but the impact is certainly broadening. Households anticipating difficulties with debt payments would do well to contact their lenders or credit card issuers in advance. Often these creditors are willing to work with people who are proactive. #economy #debt Sources: Federal Reserve G.19 Consumer Credit NY Fed Survey of Consumer Expectations

Job and wage growth slowed slightly in June, adding more evidence to the case of a cooler labor market. Further, the high readings of the past few months were revised down. Though Wednesday’s May job openings levels ticked up, the movement was slight, the rate hardly budged and those figures are subject to revision. All that to say, many of the hot takes spun up on this “increase” earlier in the week were overstated. The Fed looks for a modestly slower labor market to cool inflationary pressures; “modest” because a dramatic slowdown would indicate they should’ve already cut interest rates. As it stands, the labor market remains healthy and gradually cooling, supporting a potential September rate cut. Consumers have been under this high interest rate environment now for a year, and a greater share of households are no doubt feeling the pressure. When rates come down, businesses and consumers alike will feel the relief. Until then, it appears likely that everyone will continue reining in discretionary spending. #economy #jobs #labormarket

In May, the #labor market continued to come into better balance — with openings holding steady and separations remaining low. While we’ll know about the more recent past when the June jobs report comes out on Friday, today’s data is further encouragement that the current labor market supports continued #inflation moderation and that a September rate cut could still be at play.  Among the smallest of businesses, the rate of openings has finally come down. These small establishments were experiencing open roles well above the rate that larger businesses were, since last summer. Small business owners who struggle to fill vacancies can be forced into more dramatic measures — like cutting hours of operation — so it’s heartening to see their rosters better-filled.  The quits rate has been steady at 2.2% for the past seven months, lower than it was even before the pandemic. Recall, there was a surge of quits in 2021 and 2022, when workers took advantage of the tight labor market and found better fitting jobs. This shuffling of jobs has ended and is one sign of many that the balance between workers (labor supply) and employers (labor demand) is in better alignment. 

"Invitation Homes owned 12,726 rental houses in metro Atlanta at the end of 2023. The company exercised its market power by raising the average rent there 7.1% last year, according to the company's annual reports, while the area's median home price went up 1.3%, according to the National Association of Realtors. Invitation also stacks up to $145 in mandatory monthly fees on top of rent: up to $40 for smart home technology, $9.95 for quarterly air filter delivery, $9.95 to manage utility billing and up to $85 for internet."

The surge in new #business applications that began mid-2020 has continued, and the change doesn't begin and end with just applications. These new businesses are adding jobs, and the share of businesses less than 2 years old has continued to climb (from 16.7% in 2019 to 20.6% in 2023). My latest column looks at the data behind the phenomenon. I also discuss how continued high funding costs (and potentially waning consumer demand) could impact these young businesses throughout 2024. Check it out here: https://lnkd.in/gH3qcpnx #economy #smallbiz

The Fed’s projection of just a single rate cut through the end of the year indicates that “higher for longer” really did mean longer, and longer. This move acknowledges the slowdown in #inflation progress, or that getting price growth to a more reasonable rate will take additional time. The fact that they held rates steady yet again didn’t come as a surprise. We’re coming up on a year that the target federal funds rate — the interest rate that influences what banks charge one another on overnight loans — has been at this level. Raising and then keeping this rate high theoretically slows the #economy, and thus inflation, by dampening borrowing and spending. Recently, we’ve finally begun to see signs that the U.S. consumer is wavering in their spending vigor. #Retail sales have decreased and consumer spending has slowed. While this could be good news in that cooler demand means less fuel for the inflation fire, it also means a greater number of households are feeling the pinch. 

Some inflation slowing was expected this month, but the data came in lower than those expectations — the datapoint measuring price changes from one month to the next showed no change. Big picture, this means prices didn’t move in May, which is good news in the battle against inflation. But we know that much can hide in these aggregates. Consumers encountering ongoing high prices don’t feel relief when prices don’t change, or when inflation slows. They may not feel increasing discomfort, but there’s certainly no relief. So while the big-picture price index didn’t change from April to May, and that’s bodes well for rate cuts later in the year, we can expect to see that continued disconnect between how people feel and how the #economy is actually doing. Shelter #inflation remains sticky — it’s been growing steadily at a 0.4% rate every month for the past four months. Both rent and the index that tries to capture ownership pricing changes rose at that same 0.4% rate in May. It’s the foot-dragging characteristics of elements helping to keep the overall CPI elevated. Another price that people don’t interact with on a daily basis — that of auto insurance — slowed in May. While it’s still growing about 20% annually, it fell slightly from April. Car owners renewing their policies have encountered the considerable rise in premiums over the past year, as insurers account for higher priced vehicles and repairs. Overall, today’s inflation numbers will be a welcome sight for the #Fed, though certainly not enough to push them to cut rates. We’ll hear from Chair Powell later today when he’s expected to announce no change to interest rates for the time being. 

Inflation came in as expected — a little hung up, but not quickening. The monthly pace of core price growth did slow to a pace not seen since December, so if you’re poking around for good news, there’s that. Today’s read won’t shift the Fed in one direction or another, merely encourage more #data gathering and more waiting and seeing. Consumer #spending did slow notably relative to the past two months. While services spending grew, it grew more slowly, and goods spending actually decreased. People have been pinched for a while, and it’s likely starting to show. There’s little left in savings and it costs a lot to borrow, so households are likely reining in their spending. This cooling is encouraging for slower inflation in the coming months. For anyone not super tuned-in to inflation data, there could be some confusion over the CPI (released a few weeks ago) and PCE (today’s release). Today’s numbers are those the Fed currently “prefers” as their primary inflation gauge, and have so since 2000. Among the reasons: the PCE better accounts for consumer substitution effects (how we change our spending habits) and it accounts for a greater number of goods and services. The PCE generally has a lower #inflation reading than the CPI — so when inflation hits the Fed’s target of 2%, the CPI will read higher, likely closer to 2.5%. But if the Fed prefers the PCE, why does the CPI get all of the attention? It comes first. We’re all hungry for information, so the early read is going to get more love. Further, the CPI has merits and is useful in gauging where the PCE will go — though the two are different, the CPI feeds into the PCE, so they are closely related. 

Credit is a cornerstone for most households' finances. Whether you're taking out a mortgage or figuring out how to get a lease with stringent credit check requirements, access to credit (or a lackthereof) can open doors or block you from reaching long-term goals. While one-third of Americans feel better about their ability to manage their debt now than they did 12 months ago, 16% of Americans used credit cards to pay for necessities in the past 12 months because they couldn't cover those costs outright, according to a recent survey we worked on with The Harris Poll. My latest study for NerdWallet looks at the current state of play for credit: what types are people using, what are their related pain points and are growing debt balances and delinquencies a red flag? #credit #personalfinance https://lnkd.in/gbnWjjBw