Increasing Concern among Americans about Job Loss and Debt Repayment
The fear of job loss and the inability to repay debts has reached a high level among Americans, according to recent surveys and economic forecasts. The latest Survey of Consumer Expectations conducted by the Federal Reserve Bank of New York’s Center for Microeconomic Data revealed that concern about losing jobs is at its highest level since September 2020. Additionally, worries about being unable to make minimum debt payments have also peaked since the start of the COVID-19 pandemic.
The perceived probability of finding a job has also decreased, reaching its lowest reading in almost three years. These sentiments align with findings from previous surveys. A survey by Morning Consult revealed that 75 percent of Americans were concerned about widespread job losses, with 49 percent worried about job losses in their industry and 39 percent fearing losing their own jobs. Another survey by MyPerfectResume showed that 85 percent of participants feared losing their jobs in 2024, and 69 percent believed that competition for new jobs would intensify.
Economists participating in the first-quarter 2024 Bankrate Economic Indicator Survey predicted that the unemployment rate would rise to around 4.2 percent by March 2025. While the job market has exceeded expectations for five consecutive quarters, they also projected that employers would scale back on hiring. Economists expect job growth to average about 117,000 per month between now and March 2025, half the growth seen in the previous year.
Sean Snaith, director of the Institute for Economic Forecasting at the College of Business at the University of Central Florida, suggested that a softening of the labor market is likely to occur in the next three quarters of 2024. He does not anticipate a dramatic increase in unemployment or widespread layoffs but expects hiring to slow significantly, potentially causing the unemployment rate to rise.
Despite concerns expressed by survey respondents, Snaith believes that the national labor market is currently strong, with low unemployment rates and surprisingly strong payroll job growth. However, he acknowledges that there is some tarnish beneath the shiny job numbers. The most recent jobs report released by the U.S. Bureau of Labor Statistics showed a steady unemployment rate of 3.8 percent and a nonfarm payroll increase of 303,000. However, a closer examination reveals that a significant portion of job gains came from people being hired by government agencies or holding multiple jobs.
While wages have increased significantly, Snaith acknowledges that higher wages can lead to employers laying off workers and replacing them with automation and kiosks. This trend adds to the growing fear among Americans about job loss. For example, California’s increase in the minimum wage for fast-food workers to $20 per hour has resulted in job losses and reduced hours for many workers as employers struggle to offset the increased payroll costs.
The fear of being unable to meet debt payments is fueled by the soaring cost of living and high interest rates. Although average hourly earnings in the private sector rose by 12 cents (0.3 percent) in March and by 4.1 percent over the past year, the increase has barely kept up with the rising cost of living. The Consumer Price Index has increased by 3.5 percent over the past 12 months, putting households in a financially precarious situation.
Data from the Federal Reserve shows that total household debt rose by $212 billion in the fourth quarter of 2023, reaching a total of $17.5 trillion. Credit card balances grew by $50 billion, mortgage balances increased by $112 billion, and auto loan balances increased by $12 billion. Delinquency rates for all types of debt, except student loans, also increased in Q4 2023.
Furthermore, interest rates on credit cards have soared, with the average rate reaching 27.89 percent. This combination of rising balances and high interest rates adds to the financial distress of consumers and poses a potential risk to the economy. If interest rates continue to increase, it could potentially push the economy into a recession.
The concerns surrounding job loss and debt repayment among Americans are significant and warrant attention. While the labor market currently appears strong, there are underlying issues that need to be addressed to ensure financial stability for individuals and the overall economy.