Solutions Economic and Market Watch

Hello, and welcome to the Economic and Market Watch podcast for the week of February 03, 2025. This is John Suter of CFC.

On our first podcast of 2025, Antony Davies gave listeners a glimpse of what the future outlook for the U. S. economy looks like. This past week, Sam Kem and Jan Ahlen looked at economic and utility industry trends, examining how those trends will shape the coming year.

I'm not going to look into the future. I'm going to look at how we Americans feel about the economy right now.

Some Americans are unhappy with the current state of the U.S. economy, even though it seems to be humming — at least on paper. From a macroeconomic standpoint, gross domestic product has consistently been on the rise since 2020, with 2024 coming in at a solid 2.8%, which led The Economist magazine to tout the United States as the envy of the rest of the developed world, and at the end of 2024, adding 256,000 jobs to the labor market.

And inflation is easing with the core consumer price index, which excludes volatile food and energy prices, showing the smallest increase in six months in December. Lastly, don't forget the stock market, which was up once again in 2024 by 24%, fueling record high retirement-account and 401k balances for many Americans, both an extremely important source of wealth. So given that backdrop, Americans should be feeling great about the economy. Right? Wrong.

Voters handed Donald Trump a victory in November, reflecting widespread discontent with inflation and angst about financial security. It's a feeling that has persisted in the economy since the pandemic, which created lots of disruptions and upheaval. Many economists claim that the United States economy is back to normal, but back to normal doesn't mean a shared experience amongst all.

Here are seven takeaways that offer insight into why Americans are still feeling subdued.

Number one, let's start off with our belly — I mean, we all have to eat. Currently, egg prices are near an all time high, a core household staple. They certainly are in my household as I make Egg-McMuffin style breakfast sandwiches all the time. I often treat my fine colleagues in our business center here at CFC. It's the least I can do for all the help they afford me.

Most Americans did not like the fact that the average price for a dozen large grade-A eggs climbed more than 60% between December 2023 and December 2024. An outbreak of a highly pathogenic bird flu that began in February 2022 has killed more than 100 million egg-laying birds and continues constraining supply, driving up prices. Number two, sticking with consumption, let's move on to consumer prices. Inflation has cooled significantly since it peaked at 9.1% in June of 2022, but that does not mean prices have gone down. We are in a disinflation period, meaning when the rate at which prices are rising slows. But remember, overall prices remain elevated prior to the COVID pandemic. Even though wages have largely kept up with inflation, consumers don't want to pay those higher prices.

Number three: Child care costs. Even as inflation has largely cooled for goods such as groceries and fuel, childcare costs have only continued to rise since 2021, weighing on families already dealing with elevated prices. Let's face it, most parents put their kids first in terms of making sure they are being taken care of properly. And, in today's busy world, that doesn't come cheap.

Number four: Payment to income ratio for housing has been a real issue for many. For new home buyers, monthly mortgage payments began eating into a greater share of their income as interest rates on thirty-year fixed rate mortgages steadily rose after 2020. Home prices remained elevated because inventory continues to be constrained by homeowners unwilling to relinquish the low-interest rate mortgages they secured before the recent interest rate hikes. Moreover, rent also spiked starting in 2021 because a rush of millennials moved out of their parents' houses, creating immense demand in the rental market.

In December, Harvard's Joint Center for Housing Studies said that the number of cost burdened renters people paying more than 30% of their incomes on rent and utilities reached a record high of 22.5 million households in 2023.

Number five: In order to get to work, most Americans need transportation, and the average monthly car payments have also continued to rise. Consumers are taking out larger loans to pay for increasingly more expensive cars with interest rates influenced by rates set by the Federal Reserve, which are still considered high at around 4.3% and are not expected to come down quickly in 2025.

Number six: Along those same lines, credit card debt grew 1.17 trillion, jumping 8.1% or 824 billion from the same period last year. To be fair, though wages continue to rise and more consumers have been staying on top of their payments, such liabilities still weigh on their ability to save, invest, and cover essential costs, like the first five items that I described earlier.

Number seven: Lastly, Americans are saving far less than they were during the pandemic. The personal savings rate is hovering near lows last seen during the Great Recession, slightly over 4%. The drop-off in savings comes as consumers are spending more on vacations, concerts, and sporting events, with such spending surging 30% last year compared with 2019. Behavioral finance experts say the pandemic changed consumers' view of money, contributing to splurges on things they missed during lockdowns. Spending on all goods and services, not just extras, has consistently risen as seen in the steady rise of personal consumption expenditures.

And so there you have it. While our macroeconomic numbers for the entire nation appear much better than other developed economies on paper, there remain many hardworking Americans that feel the crunch stemming from a variety of ailments that were brought on by the pandemic in 2020. We are making progress, but the road has been bumpy and challenging for many along the way.

That's it for today.

As always, thank you for listening and be sure to download the Economic and Market Watch dashboard and the intelligence brief. Moreover, look for the link for our 2025 Trends Report in the show notes and on the Economic and Market Watch page on Solutions. We'll talk to you soon.