The U.S. economy seems to be headed in the wrong direction, with delinquency rates on the rise and sales of previously-owned homes declining by over 32% in the past two years. Inflation is also starting to rise at an alarming pace again, adding to the financial difficulties faced by many Americans. Large companies across the country are laying off workers, and the real median household income has experienced its largest decline in over a decade.
Unfortunately, it is often the most vulnerable members of society who are hit the hardest during tough economic times. According to the Census Bureau, the child poverty rate in the United States has more than doubled from 2021 to 2022. The U.S. poverty rate, measured by the Supplemental Poverty Measure (SPM), was 12.4% in 2022, a 4.6 percentage point increase from the previous year. This increase in child poverty is a record-breaking jump and is an alarming statistic that cannot be spun in a positive light.
The Census Bureau attributes this rise in child poverty to inflation and the end of emergency programs that were put in place during the early days of the pandemic. The stimulus payments and enhanced child tax credits that helped many families during the pandemic have expired, leaving families without this crucial support. While these stimulus checks were helpful at the time, they also contributed to the current high levels of inflation.
After a brief period of cooling off, inflation is once again accelerating. The Labor Department reports that the consumer price index, which measures the price of everyday goods like gas, groceries, and rent, rose 0.6% in August, marking the largest monthly increase so far this year. If prices were to continue rising at this rate every month, the official rate of inflation would be over 7% for the entire year. However, if inflation were still measured the way it was in 1980, it would be in double digits.
The middle class has been particularly affected by the rapid rise in inflation. Inflation has outpaced wage increases for several years, putting a significant strain on millions of households. As a result, delinquencies on auto loans and credit cards are spiking. Auto loan delinquency rates are now at their highest levels since 2008, almost doubling since the Federal Reserve started raising rates in March 2022. Moody’s predicts that auto loan delinquencies will reach 10% in 2024. Credit card delinquencies are also surging and are currently at their highest level in over a decade.
It is clear that the U.S. economy is at a major tipping point, and the situation will only worsen as more Americans lose their jobs. Recent news of a major groundfish company on the East Coast going bankrupt highlights the challenges faced by workers who are now left unemployed. FedEx has also announced layoffs, and Google is cutting hundreds of jobs in its global recruiting organization. These job losses indicate a troubling trend in the labor market.
Even normally optimistic figures like JPMorgan Chase CEO Jamie Dimon are not sounding positive about the economic future of the country. Dimon warns that assuming the U.S. economy will continue to boom based on consumer strength is a “huge mistake.” He points to risks such as the conflict in Ukraine, the Federal Reserve tightening monetary policies, and increased reliance on government spending as factors that could negatively impact the economy.
Decades of poor decision-making have led us to this point, and now we must face the consequences. Unfortunately, the mistakes of the past will have severe repercussions for our children. The child poverty rate has already more than doubled, and with the continued decline of the U.S. economy, it is likely to increase even further. The current state of the economy is deeply concerning, and it is clear that significant challenges lie ahead.
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