Two recent reports released on Wednesday indicate the U.S. economy is exhibiting signs of significant strain. The Labor Department reported that jobless claims rose to 238,000 last week, reaching levels not seen in nearly a year. Meanwhile, the private payroll processor ADP revealed that only 150,000 new jobs were created last month, which was below the Wall Street Journal economists’ expectation of 160,000.
In late June, the Bureau of Economic Analysis reported a tepid 1.4% growth rate for the first quarter of this year. This marks a significant slowdown compared to the 5% annual growth observed in the third quarter of last year, which further decelerated to 3.4% in the fourth quarter.
Housing market data also reflect this downturn. Pending home sales fell by more than 2% in May, and new home sales saw a dramatic 11.3% decline. As consumers reduce their spending, major retailers are feeling the pinch. Walgreens, for example, has cut its profit forecast and plans to close several underperforming stores. CEO Tim Wentworth pointed out that consumers are stunned by rising prices, prompting the company to focus on reducing prices for discretionary items.
Rite-Aid has filed for Chapter 11 bankruptcy and closed 27 stores in Michigan and Ohio as part of its financial restructuring. This is in addition to over 500 stores already closed across the nation. Ford Motor Company, attempting to cut $3 billion in costs, announced job cuts earlier this year and revealed additional layoffs last week.
Consumer spending habits have also shifted dramatically. BCA Research highlighted that Americans have exhausted the $2 trillion in savings accumulated during the COVID-19 pandemic and are increasingly relying on credit cards to cover expenses. Credit card companies report a rise in late payments and defaults, with fewer new credit line offers appearing in consumers’ mailboxes.
A recent survey by Bankrate, reported by CBS News, found that Americans feel financially secure only with an annual income of $186,000—almost three times the average income.
Additionally, a survey by the Federal Reserve Bank of Philadelphia showed that over one-third of Americans are worried about running out of money before the end of the month, an increase from 30% a year ago. Even those earning over $150,000 annually express concerns about their financial stability in the near future.
Economic analyst Michael Snyder reported that the average U.S. household now requires an additional $1,069 per month to maintain the same standard of living as three years ago. A viral TikTok video highlighted this issue when a shopper discovered that a grocery order, which cost $126.67 two years ago, now costs $414.39.
Inflation has significantly impacted various sectors. Home insurance premiums have increased by 38% since 2019, home rental prices have risen by 30% since President Biden took office, and gas prices have surged by nearly 50% since January 2021. Mortgage rates have also climbed, with the average interest rate for a 30-year fixed mortgage up by 148% over the past three and a half years, nearly doubling the average mortgage payment.
Additionally, more than 40% of retirees are contemplating returning to work to cover their expenses, and many American households struggle to find $500 for unexpected emergencies.
The latest economic reports highlight the growing financial pressures on American families. As inflation erodes purchasing power and the economy slows, there is an urgent need for effective policy responses to address these challenges.