The Conference Board’s chief economist, Dana Peterson, analyzes the job market and consumer confidence on “Making Money.”
Low and middle-income Americans are short on discretionary cash and are on track to have less than they had before the COVID pandemic upended the economy, a survey by the National Statistics Office has found. Federal Reserve System Found a San Francisco bank.
A survey released Monday by the San Francisco Federal Reserve found that liquid assets – including cash and funds in savings, checking and money market accounts – for the top 20% of households rose sharply in 2020 and early 2021 but have since declined, now standing about 2% below levels that would have been expected had the pandemic not impacted.
This trend is getting worse, American Households The lowest 80% of income earners saw their wealth grow less sharply and their savings surpluses dwindle more quickly, leaving their liquid assets about 13% lower than their pre-pandemic financial situation projections.
The move comes as credit card delinquency rates for low- and middle-income households are rising faster and at a “significantly higher” rate than higher-income households, according to the study.
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A new study from the Federal Reserve Bank of San Francisco finds that cash and liquid assets are declining among low- and middle-income households. (Joe Raedl/Getty Images)
“Financial space is shrinking, Credit stress “This poses a risk to future consumer spending growth for households in the bottom 80 percent of the income distribution,” economists Hamza Abdel-Rahman, Luis Edgardo Oliveira and Adam Shapiro wrote.
Consumer spending, which accounts for about two-thirds of U.S. economic output, and the labor market have held up surprisingly well even as the Federal Reserve has been aggressively raising interest rates in an effort to revive the economy through 2022-23. Keeping inflation in check.
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The Federal Reserve signaled it could cut interest rates next month if inflation continues to fall. (Ting Sheng/Bloomberg/via Getty Images)
These trends have given policymakers growing optimism that they can tame inflation without triggering a recession or a sudden rise in unemployment, resulting in a “soft landing” on this inflation cycle.
The strength of the economy has allowed the Fed to keep the federal funds rate in its current range of 5.25% to 5.50% and continue to drive down inflation toward the central bank’s 2% target, but the recent Economic Data There are concerns that the policy will slow the economy too much.
Fed Chairman Powell says he won’t wait until inflation hits 2% before cutting interest rates
Federal Reserve Chairman Jerome Powell said the central bank doesn’t need to wait until inflation hits 2% before cutting interest rates if inflation data is improving. (Liu Jie/Xinhua via Getty Images)
The July jobs report showed the unemployment rate rose to a post-pandemic high of 4.3% and employers are slowing their pace of hiring.
Moreover, month-on-month growth in consumer spending slowed to average 0.3% in the three months to June, the lowest average growth rate in more than a year.
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Federal Reserve Chairman Jerome Powell The governor said last month that the central bank could move to cut rates as early as September as long as inflation remained on track toward its 2% target.
He also suggested that policymakers don’t need to wait until inflation actually hits 2% before cutting rates if the data is moving in the right direction.
Reuters contributed to this report.
