US Economy thread

[jesmu84]

The bolded likely could be said about every generation in the US, now isn't necessarily any worse.

Except the recent inflation has drastically impacted purchasing power for those folks.

Therefore, I'd say that it currently is significantly worse than other times.

[dgies9156]

Much of Peoples' Expectations element of the macroeconomic formula relates to two issues: Interest Rates and Inflation on basic commodities necessary to run a household.

One of the big things that's lost in our country is the concept of what's "normal." From 2012 to 2023, we became addicted to low interest rates and low inflation. Mortgage interest rates reached levels not seen since my parents bought their first home in the early 1960s. Debt was so cheap, we as society used it in places where, frankly, we probably should not have.

To the Federal Reserve's credit, we're getting control of inflation. Unfortunately, compensation hasn't kept up with inflation. As such, folks are buying less and complaining about their dollar not going anywhere near as far. Hence, the concern about recession and economic downturn. The Biden folks have a point that the economy is in much better shape that most folks realize but the message rings hollow.

Inflation has been the "price" of the PPP and Covid-19 grants that much of society received during the pandemic. It's the same problem that our nation had in the 1960s when we tried to simultaneously fund the Vietnam War, a massive anti-poverty program and huge infrastructure programs associated with meeting the educational, social and recreational needs of 80 million baby boomers.

[Goose]

The Lens

My concern for me is extremely low. My worrying is for what I believe to be a far larger number of people struggling or have false sense of security than many on scoop feel are out there. There is a white collar employment issue and many of those people are highly compensated and currently without a job. I spoke with a senior level person last week that found herself out of a job for the first time in her career and she was told by her headhunter said that there are 10 to 1 people looking than jobs available at her level.

Hey, as rocky pointed out, what the hell do I know?

[Spotcheck Billy]

82


I have asked this question to a good number of people and curious on your thoughts. For anyone that has owned their own home for 5+ years, could they afford to buy that same house today based off of their current income?

How much of a factor would be based on higher interest rates now vs. 5 years ago?

As dgies posted above re: interest rates

How many people spent too much for homes, cars, travel etc. because it was so cheap to finance everything?

[MU82]

82


I have asked this question to a good number of people and curious on your thoughts. For anyone that has owned their own home for 5+ years, could they afford to buy that same house today based off of their current income? Virtually everyone said there was a good chance they could not. Those that said yes stated that it would definitely make other living expenses much tighter.

My point is that I 100% believe there is a false sense of security for a good number of Americans. IMO, they likely are the ones that firmly believe the economy is strong. In their defense, it is strong for them because they have a lot more paper wealth than five years ago. I fall into that category but do try and look at the big picture. I highly doubt I would feel so good if my 401k dropped by 25% and my home back to 2000 price levels.

Your last point is understandable and reasonable, Goose. It's also been that way for most people forever. A severe stock-market drop and/or a house-price contraction is always unpleasant and might even threaten people's ability to function financially. Would you have felt any better about that 5 years ago or 10 or 20 or 30 years ago?

To answer your question, I don't doubt that many people could no longer afford to buy their houses. I'm not really sure what that means about the economy, however.

As for there being a false sense of security for many, that's undoubtedly true. Would you agree that for many others, there's probably not a false sense of security?

I can only look at two things when gauging the economy:

1. My personal circumstances. I am confident that my family is financially secure and could handle the kind of negative macro economic event that happens ever so often. We survived the pandemic plunge, the Great Recession, the dot-com bust and Black Monday - the major economic events of my adult life - and I am confident that we will do OK during the next one. (And there's always a "next one," regardless of who the president is or which political party is running Congress.)

2. The data. As I and others have said, the data points to a reasonably strong economy, one that any president (and any president's supporters) would willingly claim.

Feelings and anecdotes, and the dire warnings of politically motivated people, I'll leave those "measurements" for others to use.

I don't consider the economy to be anything close to perfect. I also fully allow that millions of Americans are struggling - as has always been the case, even when America was "great."

[dgies9156]

I think it factors greatly.  However those that own homes and have 401k's are always going to feel better.  And over a long period of time those two things will always appreciate.

Lens:

Much depends on where your house is, when you bought it and how much you have invested in it over the years.

Two years ago, we sold our home in NE Illinois. We owned it for 28 years and it was a very nice home. But it was and is in a part of the state where economic growth was sluggish. After factoring in capital improvements made on the house over that period, our capital gain was less than $1,000.

I could have done better in a passbook savings account.

Owning a home is more an emotional issue than an investment.

[Pakuni]

Lens:

Much depends on where your house is, when you bought it and how much you have invested in it over the years.

Two years ago, we sold our home in NE Illinois. We owned it for 28 years and it was a very nice home. But it was and is in a part of the state where economic growth was sluggish. After factoring in capital improvements made on the house over that period, our capital gain was less than $1,000.

I could have done better in a passbook savings account.

Owning a home is more an emotional issue than an investment.

Either you got very unlucky or spent a whol lot of money on improvements that didn't increase the value of your home. Because over that 28-year period, the housing price index in the Chicago market more than doubled.

https://fred.stlouisfed.org/series/CHXRSA

[The Hippie Satan of Hyperbole]

Either you got very unlucky or spent a whol lot of money on improvements that didn't increase the value of your home. Because over that 28-year period, the housing price index in the Chicago market more than doubled.

https://fred.stlouisfed.org/series/CHXRSA

Or his house cost $2,000.

[tower912]

This thread fascinates me.    Goose, back door advocating for socialism.     Worrying about what the kids today are going to do.   I remember 30+ years ago, buying the house I am in now, paying off student and car loans, paying the bills, and having $120 dollars to last the next two weeks, because we had no savings and refused to carry credit card debt.   Of course, there was no cell phone or internet bills and cable was $50 a month.    Making dining out decisions based on the coupon book we had purchased.     
      Young people find a way, unless we weaken them.    Flying to my daughter's wedding this weekend.    They bought their first home at the end of 22
 in the Baltimore/DC metroplex.    They found a way.     My nephew and his bride were married last September, bought their house 18 months ago.   They found a way. 
    Jobs?   So many positions unfilled.    Yes, Goose, middle aged middle management types are struggling.   But so many opportunities for the still ambitious.    Traffic jams everywhere.    Waits at chain restaurants on the weekends, let alone good local ones.    Setting up tee times at least a week in advance because golf courses have closed but there is still enough disposable income to golf.   
   Of course there are headwinds.    There always are.   I said this to you a couple of years ago, Goose, when you were pulling money out of the market.    Right now, by measurable metrics, the economy is about as good as it gets.    There have been few times in any of our lifetimes with this combination of growth, employment/unemployment, inflation.     Will there be slowdowns?    Absolutely.    You never know when the next Russian or middle eastern war is going to disrupt oil.    You never know when the next pandemic will be. (better vaccinate now)    If  this hurricane season is brutal and 3-4 big ones make landfall, what will that do?
   It is an election season.    And I know that the tribes have to stake out their positions for political gain.    One of the great American traditions.  If a sitting president from a party I don't support had an economy this good in the context of what he inherited and what is going on everywhere else, I would vote for him.    I hope I get the chance someday.    Get outside.   Touch some grass. Go to a ballgame.  Hit the beach.   If you can find a spot with the economy being this good.     Breathe deeply.   
   

[BM1090]

Skatastrophy

I thought Lenny made a great point a week or so ago when he acknowledged that our economy was the best compared to the rest of the poor recoveries. My point on the economy has been that I do not understand how people making an average or below average wage are making it. To be honest, I am not sure Trump can fix what I believe to be wrong with the economy. That said, I think Biden is crazy for talking about economic success.

We will likely disagree on the root cause so I won't get too much into my thoughts on that, but I couldn't agree more with your second sentence. I'm 33, earn just under 100K per year, and with my mortgage payment, utilities, and other necessary expenses, I barely have any spending money.

I have no idea how people with kids are surviving. Or those who make closer to the median income. Unless we make major changes, which I doubt happens, a higher and higher percentage of Americans are going to struggle relative to the past.

[Goose]

BM1090

Thanks for your open post. IMO, the mess has been created by 20+ years of very poor decisions by our leaders and the Fed. All of them are to blame.

[jesmu84]

Much of Peoples' Expectations element of the macroeconomic formula relates to two issues: Interest Rates and Inflation on basic commodities necessary to run a household.

One of the big things that's lost in our country is the concept of what's "normal." From 2012 to 2023, we became addicted to low interest rates and low inflation. Mortgage interest rates reached levels not seen since my parents bought their first home in the early 1960s. Debt was so cheap, we as society used it in places where, frankly, we probably should not have.

To the Federal Reserve's credit, we're getting control of inflation. Unfortunately, compensation hasn't kept up with inflation. As such, folks are buying less and complaining about their dollar not going anywhere near as far. Hence, the concern about recession and economic downturn. The Biden folks have a point that the economy is in much better shape that most folks realize but the message rings hollow.

Inflation has been the "price" of the PPP and Covid-19 grants that much of society received during the pandemic. It's the same problem that our nation had in the 1960s when we tried to simultaneously fund the Vietnam War, a massive anti-poverty program and huge infrastructure programs associated with meeting the educational, social and recreational needs of 80 million baby boomers.

That is definitely not the whole story on inflation

[jesmu84]

https://www.bloomberg.com/news/articles/2024-05-15/child-care-is-now-more-expensive-than-rent-for-an-average-american-family

I don't understand how families are surviving.

Owning a house, cars, insurance, utilities, any college or medical debt?, childcare costs + you're supposed to save for retirement and emergency expenses?

Maybe folks are making significantly more than I think.

[The Hippie Satan of Hyperbole]

We will likely disagree on the root cause so I won't get too much into my thoughts on that, but I couldn't agree more with your second sentence. I'm 33, earn just under 100K per year, and with my mortgage payment, utilities, and other necessary expenses, I barely have any spending money.

I have no idea how people with kids are surviving. Or those who make closer to the median income. Unless we make major changes, which I doubt happens, a higher and higher percentage of Americans are going to struggle relative to the past.

I'm not doubting you, but I know plenty of people who make less than that, and who are both paying mortgages and raising a family.

I think this depends greatly on where you are choosing to live and what you, and others, would call a "necessary expense."

[Goose]

BM

Take note that Fluff thinks you are not being responsible with your money. As for me, I appreciate your situation. Unlike many on here, I do not think you are alone. Keep the faith.

[tower912]

We will likely disagree on the root cause so I won't get too much into my thoughts on that, but I couldn't agree more with your second sentence. I'm 33, earn just under 100K per year, and with my mortgage payment, utilities, and other necessary expenses, I barely have any spending money.

I have no idea how people with kids are surviving. Or those who make closer to the median income. Unless we make major changes, which I doubt happens, a higher and higher percentage of Americans are going to struggle relative to the past.

Hang in there.

[BM1090]

I'm not doubting you, but I know plenty of people who make less than that, and who are both paying mortgages and raising a family.

I think this depends greatly on where you are choosing to live and what you, and others, would call a "necessary expense."

Not being combative just providing more context.....

100% agree on where you choose to live, and when you bought your house. I bought last year after a divorce. The mortgage rate for the first house we bought was 3.7% in early 2022. The one I bought after the divorce was 6%. And I received better than average rates both times. But the rates getting worse certainly cost me some money and refinancing when that's an option will help. And obviously having a second income in the future will be beneficial.

Re: necessary expenses....the only two that are unnecessary are YouTubeTV and the 7% I'm putting towards my 401K

Mortgage, property taxes, electric, WiFi, water run me over $3K per month/$40K per year. Add in food, transportation, healthcare....it adds up quickly.

At $95K per year, I could not afford decent child care unless I sold my house and did not contribute to my 401K. I'm certain you're correct that others are managing, but I'm not sure how.

[BM1090]

Thanks y'all. I want to be clear, I'm living fine. I am comfortable. I'm grateful for my salary, my job and my life.

But I am not able to save nearly as much money as I thought I'd be able to given my salary and lack of overall debt now that student loans and my car are fully paid off. Just trying to add some anecdotal experience to the discussion.

[The Hippie Satan of Hyperbole]

Not being combative just providing more context.....

100% agree on where you choose to live, and when you bought your house. I bought last year after a divorce. The mortgage rate for the first house we bought was 3.7% in early 2022. The one I bought after the divorce was 6%. And I received better than average rates both times. But the rates getting worse certainly cost me some money and refinancing when that's an option will help. And obviously having a second income in the future will be beneficial.

Re: necessary expenses....the only two that are unnecessary are YouTubeTV and the 7% I'm putting towards my 401K

Mortgage, property taxes, electric, WiFi, water run me over $3K per month/$40K per year. Add in food, transportation, healthcare....it adds up quickly.

At $95K per year, I could not afford decent child care unless I sold my house and did not contribute to my 401K. I'm certain you're correct that others are managing, but I'm not sure how.

My guess is that their cost of housing is less, or they aren't saving for retirement like you are. And, unlike what Goose said, I wasn't suggesting you were irresponsible with money or anything. Just curious.

[dgies9156]

Either you got very unlucky or spent a whole lot of money on improvements that didn't increase the value of your home. Because over that 28-year period, the housing price index in the Chicago market more than doubled.

https://fred.stlouisfed.org/series/CHXRSA

The Chicago market appreciation was not uniform. Some communities saw huge increases. Some didn't.

In our Central Lake County neighborhood, a couple who bought a home for $320,000 right after we did sold for $550,000 in 2008. The couple that subsequently purchased the home for the $550,000 sold for $440,000 in 2018. That was typical for Central Lake County in those days. What happened was that a large-scale housing development in nearby Vernon Hills, one of the biggest in Illinois, opened for construction right when we bought the house. The development is just now being completed.

We did put in a new kitchen, finished the basement, redid two bathrooms, replaced two air conditioning compressors and two furnaces. We replaced one cedar roof and one outdoor hot tub. We also replaced every window in the house with high-efficiency windows. Most of the house had hardwood floors courtesy of us. What didn't had new ceramic.

Central Lake County has lost a number of large employers in recent years, which affected the value of our home. Allstate, in Northbrook, hired significant numbers of folks from our area, as did several pharmaceutical firms (including Abbott Labs). All have cut back or moved elsewhere. It's possible from our old neighborhood to commute downtown every day, as Metra served it, but it took 1:25 door-to-door.

[tower912]

I get it.  Michigan was ahead of the curve for the last great recession.   Nasty contracts dropped my take home down 15%.   It took me to 2016 to match my take home pay of 2005.   With a mortgage.  And Catholic schools.  And a surprise kid at 40.      Hell, there was a 5 year stretch where I was worth more if I died in the line of duty.   I did not let my wife know that.
 
Hang in there.

[Goose]

BM

I think your post was the best one today. You provided real life examples. Like you said, you are fine and comfortable, but that does not mean there cannot be a bit concern or frustration. Every time I read about the economy on scoop, I am floored. This group has to be the most successful, financially secure group in the USA.

I look back to when we were raising our family and I now appreciate having some financial stress regarding living expenses. I am glad that no scoopers raising a family have monthly concerns, but I am glad I did. It made me keep my eye on the ball and made me appreciate the smaller joys in life.

[dgies9156]

That is definitely not the whole story on inflation

No, I agree, it's not.

Let's throw in that porky infrastructure bill as well and run-up in petroleum prices.

[The Hippie Satan of Hyperbole]

BM

I think your post was the best one today. You provided real life examples. Like you said, you are fine and comfortable, but that does not mean there cannot be a bit concern or frustration. Every time I read about the economy on scoop, I am floored. This group has to be the most successful, financially secure group in the USA.

I look back to when we were raising our family and I now appreciate having some financial stress regarding living expenses. I am glad that no scoopers raising a family have monthly concerns, but I am glad I did. It made me keep my eye on the ball and made me appreciate the smaller joys in life.

Hold on.

You are now mixing up two things. The economy can be performing well by all objective metrics, but people can still "feel" financially insecure for whatever reasons. Personal circumstance probably being the most likely.

Those two things aren't necessarily linked.

[The Hippie Satan of Hyperbole]

No, I agree, it's not.

Let's throw in that porky infrastructure bill as well and run-up in petroleum prices.

I think the biggest issue is a labor shortage with Boomers retiring (accelerated by the pandemic) and not enough GenZers filling in the other end of the pipeline.