The latest economic reports released on Wednesday indicate mounting pressures on the U.S. economy. The Labor Department disclosed that layoffs surged to 238,000 last week, nearing a one-year high. Simultaneously, ADP, a private payroll processor, reported a disappointing addition of only 150,000 new jobs in the last month, falling short of Wall Street Journal economists’ modest expectation of 160,000.
In late June, the Bureau of Economic Analysis revealed that the U.S. economy grew at a sluggish rate of just 1.4% in the first quarter of this year. This is a stark contrast to the robust 5% growth rate seen in the third quarter of the previous year, which subsequently slowed to 3.4% in the fourth quarter.
The housing market is also showing signs of weakness. In May, pending home sales, where contracts have been signed but not yet closed, fell by more than 2%. New home sales dropped significantly by 11.3%. As consumers cut back on spending, retailers like Walgreens have been forced to revise their profit forecasts downward and plan to close numerous underperforming stores. Walgreens CEO Tim Wentworth attributed this to consumers being “stunned by the prices,” necessitating price reductions on discretionary items.
Rite-Aid has entered Chapter 11 bankruptcy, closing 27 stores in Michigan and Ohio as part of its financial restructuring. This follows the closure of more than 500 stores nationwide. In an effort to reduce costs by $3 billion, Ford Motor Company announced job cuts earlier this year and revealed further layoffs last week.
Consumer spending habits have notably shifted, with many turning to credit cards to cover expenses after exhausting the $2 trillion in savings accumulated during the COVID-19 pandemic. BCA Research highlighted this trend, noting an increase in late payments and defaults on credit cards, while offers for new credit lines have dwindled.
A recent Bankrate survey, reported by CBS News, found that Americans feel financially secure only with an annual income of $186,000—nearly three times the average income. A Federal Reserve Bank of Philadelphia survey revealed that over one-third of Americans worry about running out of money before the end of the month, up from 30% a year ago. Even households earning over $150,000 annually express concerns about their financial stability in the coming months.
Economic analyst Michael Snyder noted 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 underscored 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.
These reports reflect a broader economic strain affecting Americans at all levels. With inflation continuing to erode purchasing power and economic growth slowing, there is an increasing need for comprehensive measures to address these growing financial challenges.
