Private Client Group

May 19th, 2023

Consumers Still Spending, Credit Delinquencies Rise, U.S. Workers Not Relocating

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The U.S. Consumer Won’t Go Away – In the first quarter of this year, it appeared that the U.S. consumer was pulling back spending. Some economists pointed to dwindling savings and rising concerns about the health of the banking system as reasons for the slight retrenchment. Others cited worries over the jobs market. Data from April shows the pullback didn’t last very long – retail sales for the month rose a seasonally adjusted +0.4% from March. Retail sales measure spending at stores, online, and in restaurants. The Commerce Department reported that spending on dining out, shopping online, and autos all went up. Consumers pared back spending on big-ticket items like furniture and appliances, however. The uptick in consumer spending is a positive development, but there is an important caveat to retail sales data – it does not adjust for inflation. Year-over-year, retail sales rose by 1.6%, but inflation went up by 4.9% over the same period. In other words, consumers are not necessarily out spending more, they’re just paying more for the same items.1

Is Your Retirement Prepared for What’s Next?

If you are like most investors, you are concerned about your retirement. One reason for this worry—that is shared by most people—is that there are so many unknowns.

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Consumers are Spending, But Are They Using Too Much Credit? Delinquency rates on credit cards, auto loans, and mortgages are rising. According to the Federal Reserve Bank of New York, about 4.57% of credit card debt crossed 90+ days delinquent in the first quarter, compared to 3.04% in Q1 2022. For auto loans, the delinquent rate rose from 1.61% to 2.33% over the same period, and mortgages moved from 0.34% to 0.54%. Many readers may rightly point out that these figures are quite low, which should be encouraging when thinking in terms of macroeconomics. They are also pretty much in line with pre-pandemic levels when the economy was in fine shape. But there are two features of this delinquency data that are worth noting. The first is that the age group with the highest delinquency rate was 18- to 29-year-olds. The second is that this age group is generally the cohort with the highest level of student debt, the payments of which have been paused because of a Covid-era policy. The question is, what happens to this group when the freeze on federal payments is lifted? The expectation is that delinquencies could rise further, not just in credit cards but also in student loans. All the more reason to start financial education at a young age.3

Source: Federal Reserve Bank of St. Louis4

U.S. Workers are Staying Put – One of the economic legacies of the pandemic was the rise of remote and hybrid work, which spurred many workers to leave cities in search of homes that could facilitate home office setups. In many cases, workers could keep their jobs and work remotely. The return to offices has halted this trend, along with higher mortgage rates that have cooled the housing market. But a recent study also finds that workers are relocating for jobs at the lowest rate on record, with records going back to 1986. Back in the 1980s and 1990s, about one-third of workers would move for new jobs, but higher housing costs coupled with the ability to work remotely have seen these figures plummet. In a survey conducted in Q1 2023, only 1.6% of workers relocated for a new job.5

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Disclosure

1 Wall Street Journal. May 16, 2023. https://www.wsj.com/articles/us-economy-retail-sales-april-2023-6cc8601e?mod=djemRTE_h

2 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.

3 Wall Street Journal. May 16, 2023. https://www.wsj.com/articles/credit-card-car-debt-payments-behind-decc1a22?mod=djemRTE_h

4 Fred Economic Data. February 21, 2023. https://fred.stlouisfed.org/series/DRCCLACBS#

5 Challenger Gray. May 16, 2023. https://www.challengergray.com/blog/q1-2023-job-seeker-relocation-falls-to-lowest-on-record-as-remote-hybrid-work-persists/?mod=djemRTE_h

6 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.

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