The approaching economic meltdown shouldn’t come as a surprise to anyone. Throughout U.S. history, there have always been signs indicating an upcoming downturn, and that is evident in the current state of affairs. Tax revenues have significantly decreased, the demand for trucking services and cardboard boxes has plummeted, and the money supply is shrinking at an unprecedented rate. Moreover, the Conference Board’s index of leading economic indicators has declined for 15 consecutive months. Given these alarming trends, it’s hard to ignore the economic disaster that is rapidly approaching.
One of the most telling signs of an economic downturn is the decrease in tax revenue. Both federal and state government tax revenues have seen a precipitous decline. Recently, U.S. state and local governments experienced the largest decline in income tax revenues ever recorded. This decline was the second steepest in history, with only the Global Financial Crisis having a worse outcome. Federal tax receipts have also dropped to recessionary levels, approaching a 10% year-over-year decline.
Another indicator of an economic slowdown is the decrease in demand for trucking services. This is deeply concerning since truck freight volume and spending plummeted during the second quarter of this year. According to the U.S. Bank Freight Payment Index, spending by shippers dropped by 10.9% compared to the same period last year, while shipment volume dropped by 9%. These numbers are reminiscent of the early days of the pandemic when the economy was hit hard.
Employment, often seen as the bright spot in the economy, is not immune to the downturn either. The latest employment report reveals that the U.S. lost 585,000 full-time jobs last month. This marks the biggest monthly drop since the record job losses during the Covid-19 crash, which saw 14.7 million jobs vanish. The bleak job market is further exacerbated by companies announcing more job cuts this year than in all of 2022.
The housing market, another area detrimentally affected, is experiencing the crushing impact of rising interest rates. Monthly costs for new homebuyers have surged nearly 20% compared to a year ago. This increase in costs is hindering the housing market’s recovery and making it even more challenging for potential buyers to afford homes.
Commercial real estate is also facing significant challenges, as delinquency rates for commercial real estate mortgages are skyrocketing. This is an early indication of the worst commercial real estate crisis in U.S. history. The delinquency rate for office properties securitized into Commercial Mortgage-Backed Securities (CMBS) spiked to 5.0% by loan balance in July. This surge of 2.2 percentage points in three months is the largest recorded in the data going back to 2000.
Moreover, a growing share of the U.S. population cannot afford a $400 emergency expense. The percentage of adults who could cover such an expense with cash or equivalents dropped by 2 percentage points from the previous quarter, currently sitting at 46%. This highlights the financial strain many Americans are facing despite the recent decrease in headline inflation.
Despite these worrisome trends, Joe Biden and his supporters insist that everything is fine. Joy Behar, co-host of “The View,” even claimed that “the economy is booming” and that people are having an easier time putting food on the table. However, these statements disregard the harsh reality that many Americans are facing.
On top of all these economic concerns, our financial institutions are vulnerable to cyberattacks. Just recently, Wells Fargo customers experienced money disappearing from their accounts due to “technical glitches.” While the issue was resolved for most customers, it serves as a reminder that diversifying one’s financial assets is crucial as our banks face increasing cyber threats.
Unfortunately, many Americans remain unaware of these economic indicators and the gravity of the situation. They continue to trust that our leaders have everything under control, but they will undoubtedly be disappointed when reality sets in. As the economic crisis looms closer, it becomes imperative for individuals to educate themselves and prepare for the challenges that lie ahead.
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