Our nation’s economy is at an incredibly important inflection point. Credit card debt recently soared to a new record high, and shoppers using credit cards face rising serious delinquency rates. Recent data released by the New York Federal Reserve paint a deeply worrying picture. These developments are indeed troubling signals on the state of our economy. Hiring figures are heartening, too, with 22,000 new jobs added last month. With the unemployment rate back up at 4.3%, we know there are more fundamental problems in the labor market.
The backdrop of rampant rising credit card debt, which recently just hit an all time high, further muddies the economic waters. Consumers are being affected by economic distress. To make matters worse, for the first time in four years, more people are searching for jobs than there are jobs to go around. This paradigm shift has resulted in a challenging environment for employees and employers at the same time. Additionally, the alternative inflation rate is projected to jump to 3.2% within a year.
Credit Card Debt and Delinquencies on the Rise
With Americans facing increasing inflation and struggling to meet their financial needs, credit card debt has skyrocketed to an all-time high, putting millions of Americans at risk. According to the New York Federal Reserve, serious delinquencies are at a level not seen in over 10 years. This continuing trend is deeply concerning as we think about the future of consumer confidence and spending power.
“There is, of course, no guarantee that ominous clouds will deliver the future they seem to portend. But there is simply no plausible case today that the economy is doing really well now.”
This sentiment captures the anxiety many experts are expressing about what often appear to be confusing economic indicators. Inflation as of July is at 2.7% and is projected to increase further. Consequently, consumers are more judicious with their discretionary spend.
Consumer spending has continued to be surprisingly robust. Specialists caution that this resiliency can’t withstand growing debt and inflation indefinitely. Businesses are really starting to feel the pinch. Tariff uncertainty makes it difficult for many employers, especially in tariff-sensitive sectors like construction and manufacturing, to bring on new employees.
Labor Market Challenges
According to the new jobs report, just 22,000 additional workers entered the job market last month. The nationwide unemployment rate went up too, from 4.2% in July to 4.3% in August. Measured historically, this number is still under the long-run average unemployment rate of 5.7% since 1948. Yet the pace of new job seekers is accelerating even faster. This trend is an early indication that the labor market may be starting to weaken.
Morgan Stanley’s equity team notes critical insights into the nature of current employment statistics:
“Central to our view is the notion that the economy has been much weaker for many companies and consumers over the past three years than what the headline economic statistics like nominal GDP or employment suggest.”
Looking deeper, the data tells a more complicated story where positive news on hiring does not lead to strong current or future economic signals. The economy actually lost 13,000 jobs in June. This worrisome trend represents the first time since 2020 that layoffs have exceeded new hires.
Job seekers are waking up to an unstable and dangerous job market. If they’re unemployed, then they think they have only a 44.9% chance of getting one. This feeling further highlights the growing confusion among the public as they work to keep pace with an ever-changing labor landscape.
Optimism Amid Economic Concerns
Some analysts highlight a silver lining: many companies are reporting higher future earnings growth potential compared to previous years. This optimism may reflect a belief in eventual recovery or adaptation within industries as they adjust to current economic pressures.
“We think a better way to measure the health of the economy is earnings growth (and breadth) as well as consumer and corporate confidence surveys.”
While the statistics paint a discouraging picture, there is cause for optimism on the horizon. We’ve seen that companies are resourceful and can recalibrate, and we’ve seen that consumers are nothing short of resilient.
While there may be pockets of hope within sectors showing promising earnings growth, pervasive economic challenges remain evident across various facets of American life.
“It is not hard to perceive ominous storm clouds on the horizon.”
While there may be pockets of hope within sectors showing promising earnings growth, pervasive economic challenges remain evident across various facets of American life.