Consumer Debt Reaches All Time High

 As of February 16th, 2023 consumer debt in the U.S. has reached a historic high of 16.9 trillion dollars. This is over 1 trillion dollars higher than last year, 1.3 trillion dollars in particular. This increase mainly comes from the 11.9 trillion dollar increase in mortgage balances and very high-interest rates. These major increases show the massive extent of the consumption factor in the U.S. economy and how it is still constantly growing and expanding. 

When looking at the specifics of why this increase happened one of the most important things, as I have previously mentioned, is the mortgage market. Serious delinquency mortgage loans of 90 days or more, which are known to be one of the worst-owned mortgage loan types, went up 0.57%. This is double the percentage from 2022 and is an overall negative in terms of the future of the housing market and consumer spending. Auto loans were also affected this past year as these loan delinquencies rose as well to 2.2% and credit card debt jumped as well. All of these different debts heavily contributed to the overall debt increase in consumption. 

The Fed attempted to fix current inflation problems, the main issue of why this debt happened, and raised its benchmark rate seven total times over the past year. These benchmarks raised the borrowing rate and boosted rates for items that cause debt such as credit cards and a variety of loans. As the Fed continues its advances at lowering the inflation rate it will have to begin to consider how it is affecting the people and the spending rates in our country or else it might bite them later on.

Article- Consumer debt hits record $16.9 trillion as delinquencies also rise (cnbc.com)

Covid’s ‘legacy of weirdness’: Layoffs spread, but some employers can’t hire fast enough

 Some of the biggest companies in the U.S. are laying off thousands of employees as 103,000 jobs were lost in January of 2023, the most since September of 2020. At the same time, 517,000 jobs were gained during the same month, making economists question what our future really looks like. 

As tech companies continue their layoffs, service industry jobs like Chipotle workers and airline pilots are coming back after being decimated by the pandemic. Many service industry companies are doing things like increasing wages, incentives, and even holding job fairs to help hiring. Workers are available and companies want to hire, it just comes down to giving them the skills they need to complete sophisticated jobs. All of this stands true even with rising consumer spending, rising inflation, and rising interest rates.

https://www.cnbc.com/2023/02/20/weird-job-market-layoffs-hiring.html

Despite Inflation, Consumers Continue to Dine Out

According to the Bureau of Labor Statistics' (BLS) January Consumer Price Index (CPI), the price of groceries increased 11.8%, while dining out increased 8.2%. As a result, consumers are spending more to eat out than they are for groceries. This trend began around the beginning of 2021 and has continued since. In January 2023, Americans spent approximately $86.6 billion at restaurants. This equates to an increase of 24% compared to January 2022. The current behavior of consumers is contradictive to economic theory. Specifically, as food prices increase, we would expect consumers to cut back on dining out and allocate more income to groceries. Part of the increase in restaurant spending can be attributed to more consumers are ordering take away. Another component driving restaurant spending is consumers sentiment after COVID. More individuals are willing to go out and pay the extra money because they were isolated for so long. Personally, I believe consumers may be using mental accounting, which could explain why they seem unresponsive to price changes. 

Article: https://finance.yahoo.com/news/consumers-are-still-spending-at-restaurants-despite-inflation-193806216.html