U.S. Consumer — Week of September 9, 2024

Health of the growth engine

Essential Economics

— Mark Frears

U.S. households

Do you like breakfast for dinner? At our house, we do, and apparently, we are not alone.

Per capita consumption of the eggs in the United States from 2000 to 2024

Eggs are great in everything from omelets to French toast, to over-easy on top of pancakes. Yum. They have even been used on the ice in hockey practices, as seen in the original Mighty Ducks flick. Classic. Can you make a soft catch?

The current economy is probably in a soft-boiled state. Not solid like a hard-boiled egg, but not fragile either. Let’s take a look at what U.S. households are thinking.

Fed study

Most people think the economy is doing OK. They have jobs, but inflation is still having an impact. The Fed study we are looking at shows that people in 2023 felt about the same from a financial well-being state as in 2022. The Survey of Household Economics and Decision Making (SHED) is done by the Federal Reserve Bank on an annual basis: https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf. This study was published in May 2024, based on data gathered in October 2023. As you can see below, we are on a downward trend.

At least doing okay financially(by year)

Inflation continues to be the top financial concern, even as we have seen improvement here.

Categories of self-reported main financial challenges in 2016, 2022, and 2023

Employment

Coming out of the pandemic, we hear much about working from home. The chart below shows the current state by education level.

Amount of work done from home (by education)

In 2023, 16% worked fully from home, while 23% did so some of the time. Prior to the pandemic, only 7% worked mostly from home.

There were changes to both income and spending from the previous year. As you see below, income increased by 34%, but that did not keep pace with expenses going up by 38%.

Share with increases and decreases in monthly income and spending from 12 months earlier (by year)

The chart below shows how lower-income families tend to spend more than their income. They cannot keep up with higher costs, showing the fight against inflation is not over.

Monthly speeding relative to income (by family income)

Emergency, or unexpected, expenses can often derail a budget. The chart below shows that households were at the same place in 2023 as in 2022. Sixty-three percent of them could meet a $400 expense with cash.

Would cover a $400 emergency completely using cash or its equivalent (by year)

This is back to pre-pandemic levels, but it would be good to see the prior uptrend continue.

Housing

This category is the largest component of households’ budgets. Sixty-four percent of families own their homes, and two-thirds of those had a mortgage. As you can see below, the median monthly mortgage payment was $1,500.

Median monthly mortgage payment (by census region and most recent move)

There is significant variability based on the region of the country and how recently you moved. What caught my eye was the difference between moving after 2022. This added, on average, $700 to your payment. An increase of 50%.

Those who rented, by choice or necessity, faced slightly lower expenses. As seen below, median overall rent was $1,100.

Median monthly rent payment ( by census region and most recent move)

The reasons for renting were very similar to 2022, as you can see below.

Retirement and investments

If you are not retired yet, how are you doing in saving/preparing for this significant life event? Per the chart below, only 34% feel they are on track, but this is up from 31% in 2022.

View retirement savings plan as on track (by year)

As for the ones already at this stage, 27% of adults, how are they doing? Four percent of retirees are still working. The chart below shows the range of financial well-being among those in retirement.

Financial well-being among retirees without labor income

As you can see, the ones relying fully on social security are less OK.

If they have investments to rely on, there is a wide range of comfort in managing those assets. The chart below breaks this out by investable assets and gender.

Mostly or very comfortable choosing and managing investments

Looks like an opportunity for investment advisors to come alongside people!

Possibly, this view makes you feel like you are doing OK, or maybe it opens your eyes to how many are living from a financial well-being perspective. The economy seems to be chugging along, with a few cracks starting to show. The question now is whether a Fed easing will have an impact, or whether this is a hopeful move toward a soft landing. Stay tuned.

Economic releases

Last week was all about jobs, and the picture is of a slowing labor market, but not one contracting.

This week’s calendar is all about inflation, with the all-important last major indicator before the FOMC meeting on September 17-18. CPI is the headliner, but we also have PPI, Consumer Credit and Consumer Sentiment. See below for more details.

	Upcoming Economic Releases:	Period	Expected	Previous
9-Sep	NY Fed 1-yr inflation expectations	Aug	N/A	2.97%
9-Sep	Consumer Credit	Jul	$11.200B	$8.934B

10-Sep	NFIB Small Business Optimism	Aug	93.7	93.7
10-Sep	First Presidential Debate	8p CT

11-Sep	Consumer Price Index MoM	Aug	0.2%	0.2%
11-Sep	CPI ex Food & Energy MoM	Aug	0.2%	0.2%
11-Sep	Consumer Price Index YoY	Aug	2.5%	2.9%
11-Sep	CPI ex Food & Energy YoY	Aug	3.2%	3.2%
11-Sep	Real Avg Hourly Earnings YoY	Aug	N/A	0.7%
11-Sep	Real Avg Weekly Earnings YoY	Aug	N/A	0.4%

12-Sep	Initial Jobless Claims	7-Sep	227,000	227,000
12-Sep	Continuing Claims	31-Aug	1,850,000	1,838,000
12-Sep	Producer Price Index MoM	Aug	0.2%	0.1%
12-Sep	PPI ex Food & Energy MoM	Aug	0.2%	0.0%
12-Sep	Producer Price Index YoY	Aug	1.7%	2.2%
12-Sep	PPI ex Food & Energy YoY	Aug	2.4%	2.4%
12-Sep	Household change in Net Worth	Q2	N/A	$5,117B
12-Sep	Monthly Budget Statement	Aug	-$276.0B	-$243.7B

13-Sep	Import Price Index MoM	Aug	-0.2%	0.1%
13-Sep	Export Price Index MoM	Aug	-0.1%	0.7%
13-Sep	UM Consumer Sentiment	Sep P	68.3	67.9
13-Sep	UM Current Conditions	Sep P	61.5	61.3
13-Sep	UM Expectations	Sep P	70.5	72.1
13-Sep	UM 1-yr inflation	Sep P	2.7%	2.8%
13-Sep	UM 5-10-yr inflation	Sep P	3.0%	3.0%

Mark Frears is a Senior Investment Advisor, Managing Director, at Texas Capital Bank Private Wealth Advisors. He holds a Bachelor of Science from The University of Washington, and an MBA from University of Texas – Dallas.

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