The economy is slowing and that will hit the zoomers first and the hardest, especially renters.
Shaky Ground
The idea for this post comes from the Wall Street Journal article American Borrowers Are on Shakier Ground.
Years of higher inflation and interest rates have left consumers mired in debt, even as overall economy hums.
I dispute the Journal’s statement the “overall economy hums”.
If the economy was humming we would not see charts like I am about to present.
Unexpected Expenses
That chart is from the Federal Reserve Report on the Economic Well-Being of U.S. Households
The report was updated May 21, 2024 but it it only through 2023. Zoomers and younger Millennials are in trouble.
Rot Starts at the Periphery
The Wall Street Journal comments Big Banks and Customers Continue to Feel Pressure From Higher Rates
JPMorgan’s second-quarter profit declined 9% year-over-year to $13.1 billion. That figure excludes one-time items, including a $7.9 billion gain on an exchange of the bank’s shares of Visa.
Credit-card loans rose faster than spending at all three banks, a sign that more borrowers carried over balances month to month.
“When you really dig into what’s happening across different consumers, the folks on the lower end of the wealth or income spectrum are struggling more,” Wells Fargo Chief Financial Officer Mike Santomassimo said on a call with reporters.
JPMorgan’s credit-card arm—the biggest in the country—said charge-offs on loans rose by nearly two-thirds from a year earlier. The rise in part reflected a normalization from years of historically low levels, Chief Financial Officer Jeremy Barnum told reporter
JPMorgan CEO Jamie Dimon repeated his view that interest rates could wind up staying higher than some economists have forecast.
“Market valuations and credit spreads seem to reflect a rather benign economic outlook,” he said in prepared remarks. “But there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”
Auto Loans Plunging
The above chart and the next few are from the New York Fed Household Debt and Credit Report for 2024 Q1.
Are auto loans a sign of a humming economy? I think not.
Transition into Serious 90+ Auto New York Fed Quarterly Report
Transition into Serious 90+ Credit Cards New York Fed Quarterly Report
Maxed Out Borrowers
If you have maxed out your credit card there is about a 33 percent chance you are delinquent.
Who might that be?
Maxed Out Credit Card Users
The preceding two charts are from the New York Fed report Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers
Notably Gen Z has the highest delinquency transition rate, but Millennials were the only group whose delinquency exceeded their pre-pandemic rate.
Let’s return to the first chart, repeated for convenience.
Percentage of Consumers with Unpaid Bills by Homeownership Status
Over 25 percent of those who rent have unpaid bills! Over 10 percent have not paid their water, gas, or electric bills.
This isn’t humming. It’s the verge of disaster. And I have been talking about this setup all year.
April 20: People Who Rent Will Decide the 2024 Presidential Election
May 31: Why Consumers Are Angry About the Economy in Five Pictures
June 19: Why Angry Renters Will Decide the Election, Take II
July 5: The Unemployment Rate Bottomed a Year Ago, Who’s Impacted the Most?
Generational Homeownership Rates
The Fed does not see this freight train coming even though it is standing in the middle or the track facing the oncoming train. This is despite nearly all of the charts in this post are from Fed reports.
And most economists are as blind as the Fed.
Unemployment Rate by Age Group
Candidate Preference by Age Group
An amazing 41 percent of those 18-34 are for Trump with only 30 percent for Biden.
That’s an unprecedented 11 percentage point gap for Republicans. In 2020 this age group voted overwhelmingly for Biden.
I discussed the above poll and also candidate preference by race in Post-Debate USA Today-Suffolk Poll Has Grim News for President Biden
Please click on link for 11 charts.
So who are the renters that will decide the election?
Zoomers, millennials, and black renters. They are priced out of a home while watching rent go up at least 0.4 percent every month for 33 months. That string finally snapped in June with a 0.3 percent rise.
Biden Seeks Rent Controls
On July 17, I noted Biden Seeks Supreme Court Term Limits, Medical Debt Cancellation, Rent Controls
Sorry Joe, it’s too late. You are gone and a recession has started, not that rent controls had a chance. They are a terrible idea anyway, but desperation set in.
A recession coupled with a weakening economy for the next three months is hard to overcome, especially given Kamala’s political baggage.
On July 8, I commented Weak Data Says a Recession Has Already Started, Let’s Now Discuss When
Since then, more weak data hit the fan.
I tie the economic picture together in Three Top Reasons Mortgage Delinquencies Are Rising
Rot starts at the periphery then spreads to the core. Panic is coming.
Added a chart to my post.
An amazing 41% of those 18-34 are for Trump with only 30% for Biden.
That’s an unprecedented 11 PP gap for Republicans. In 2020 this age group voted overwhelmingly for Biden.
Zoomers are not exactly happy with the economy – They rent
https://x.com/MishGEA/status/1815758677913239884
And more and more of those in that group, 25 to 30, are living with their parents because of it.
Great article and update
Tell me about it. The boomerang generation, but what choice do they have?
agreed
The young want results and not words where the old prefer words and the status quo.
Many in the 18-34 group in 2020 – they’ve aged up since, to 35-49 this time.
Thinking about this for 24 hours, while I agree with everything you said here Mike, what I do not believe in is will these voters(assuming they vote because a lot at that age group do not vote) but will these voters just get brainwashed again that this is all anyone else fault but the democrats?. They always fall for those white republicans are the evil ones and always holding us down. That is the majority african american take still to this day. The young white kids maybe are going away from the democratic party, just do not want to bet on that just yet.
I hate to keep bringing up race i think it applies here
A couple of anecdotes…
A colleague of a teacher friend of mine is a Gen Z’er. She makes between $65k – $70k in an urban setting. She lives at home, and is being smart and paying off her students loans. She recently paid off her car loan (another smart move). You’d think someone like this would be doing OK, but they aren’t. This person is, by her own admission, flat broke. She spends every penny that doesn’t go towards her student loans on food out, trips, and clothing, all the while complaining that she can’t afford to move out.
I was at the Dr. a couple of weeks ago, and we were chatting about the economy and the subject turned to young people. My Dr. has a Gen Z aged sister who lives in NYC. She’s constantly complaining about the cost of rent. Meanwhile she tells her brother (my Dr.) how excited she was to buy a $700 pair of Louis Vuitton flip flops. $700 for a pair flip flops, but struggles with rent…..things that make you hmmmm.
There’s no doubt that there are alot young people who are genuinely struggling, but I believe the behaviors described above are quite widespread. Social media and the proliferation of FOMO and YOLO attitudes are driving young people to make really stupid spending decisions. They blame everyone but themselves.
I’ll admit it doesn’t really matter if these young people are genuinely struggling or not. They will vote for whomever they “think” will allow them to eat thier cake and have it too. Based on the polling it looks like that person is Trump.
definitely on the behaviours. And don’t forget vacations. There all broke, but they can get on a plane and book 4 star minimum hotels all over the world.
It is just a different world………….
A lot of blame to go around but the biggest one is the actual person buying $700 shoes and taking out excessive loans for mediocre salary degrees. They did it to themselves.
I have read about high school kids taking trips to Europe during spring break. How times have changed since my days in high school and college. Had to hitchhike on one trip. Other trips in a VW bug. No foreign trips at all.
my kid was the grasshopper until the real estate winter hit. now struggling to be an ant
She should try to generate more revenue by setting up an Onlyfans page… or perhaps working for a sugar daddy. She seems the type
The economists aren’t blind. They’re spouting the same bs as the MSM. This is why Trump is going to win in a landslide regardless of who the democratic nominee is. There’s no chance of things getting better with the status quo so they’ll be voting for change. Trumps mouth is who Trump is. It’s part of the package.
Trump – The Great White Hope hahaha
Thomas Crooks dad : a 400 lbs radical.
or is that Dadical?
The credit card interest rate is over 20%, most are 25% or a bit more so the banksters are engineering a significant issue of their own problems on defaults there.
– The economy is slowing and that will hit the zoomers first and the hardest, especially renters.
> Makes sense to Me, as a small but sizable percent of Zoomers are the New “Buy Now;Pay Later” Group. That sort of approach to finance, has you achieving anything and everything you want, Until…
1. School Loans are Now Due
2. Increasing Rent just went up again, and last months was due last week.
3. Yes, EV’s really are that expensive to Buy and Own
4. Been to the Dentist Lately
5. Been to the Doctors Lately
6. Keeping up with Pet Cost
7. Learning how to cook
8. Working 2 jobs and thinking you may need a 3’rd
9. Cost of Staples (Food & Energy) are through the roof
10. What’s Entertainment Again
> If it’s not subsidized, forgiven, postponed, lawsuit, or something sellable, it’s not getting paid. The Overall Economy is in Shambles, but the MSM doesn’t want you to know that of course…
The value of used cars is down by a 1/3. Why should Gen Z pay. Gen Z don’t need a 100K smile. Gen Z don’t need a bypass or a hip surgery. Since Nov the regional banks popped up like a rocket. That isn’t sort covering.
That’s government bailout
That’s a breakout > accumulation.
Oh please, stock patterns reflect business events
Broken window fallacy economy. Cash for clunkers, gain of function research that produced only losses and wars that serve no purpose for US citizens.
The younger generations are now screwed long term for all of it. I would like to see one major national effort to actually fix something which produces real gains, like burying power lines in storm prone areas and more nuclear power plants. Congress unfortunately likes breaking windows.
rocky mountain power (utah) wants to bury lines in areas prone to fire, wind and heavy snow. But they want to raise rates 30% to pay for it and other things. And they don’t do time of day metering so there’s no way for the consumer to ease the burden
Time of day metering is awful. My parents suffer this in Canada and have to wake up at 5 am to do laundry and other things at off hours that use electricity.
Pray you never have to deal with it.
The above data will be the epitaph for Kamala, or whomever the Democrats run.
I know people in the dental industry and they are seeing a slow down in patients. I would think that people might skip normal dental visits if they are strapped for cash. This might be another indicator of consumer stress.
So we’re at 2019 levels?
“Auto Loans Plunging”
Marxist Democrats want 15 minute cities, where the public owns no private motor vehicles.
I would accept something that keeps those loud fartcan cars off the streets. I don’t see the fascination of making noise.
An excellent article Mish!!. Reminds me of the old Daily Reckoning, that pointed out the holes in the propganda of the financial press and government numbers.
Market is priced for absolute perfection and no negative outcomes. Oddest thing I’ve ever seen. With so much political uncertainty up against what will be our first hard fiscal limit in some time in 2025, combined with weakening data still burdened by inflation you’d think the market would price in some discount for that news. Nope. That does soften the blow for asset holders/boomers and stings non asset holders.
Jamie Dimon was correct about valuations reflecting a rather benign outlook; actually it’s reflecting sunshine forever. Then he goes on to point out huge headwinds like inflation and fiscal deficits (not a headwind if you’re the recipient on the surplus side of that equation!). Anyone think they’ll address that? Will Mr. Market even try to force them to?
However note that embedded in his comments were utter garbage like remilitirization of the world. Sadly likely true but oh such a misallocation of resources, like buying fireworks and shooting them off.
And infrastructure is always mentioned but I will note that as I’ve traveled the country extensively for the last 14 years, many things are in far better shape than they’ll portray. Infrastructure is always a place deficit spending/bonding bills finds a home.
We need some pain to refocus.
Mish: “I dispute the Journal’s statement the “overall economy hums”.”
I agree, but consider the source. It’s the same main stream media that has been lying about Biden’s health for four years. The same people are now telling us that Kamala is ready to “finish the job”.
Can’t afford a car, can’t afford a house, can’t start a family, can’t vote for Kamala.
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Buy now.
Don’t pay later.
Skip town.
Go to the dump. Get a free bicycle. No need for ozempic, you’re sweating your ass off or freezing it off in the winter. No need to pay for a gym. While biking, stop by the side of the road and find a big rock. Throw it around for a while. Healthcare costs plummet. All the time you’d spend buying crap on the Interwebs, you’ll be biking to and fro. Credit card debt falls. Bikes made China great!
I read many years ago that during the last Great Depression, the most successful businesses were bicycle sales and repair shops. Not counting the top stock, Homestake mining!
there are few internet “likes” to be had riding a recycled garbage dump bicycle.The children have been groomed by their phones to seek the bling and reject the common.They aspire to influence by the sum of their charms and their brand name luxury designer treasures, it is the most lofty position now supplanting “movie star” and “rock star” as impractical career choice.
So easy to pursue, one must only “wait” to be discovered by their audience.
Its sort of the cargo cult of the modern age, the modern mind. To build a nest egg by labours or by skills in crafts is thought insane and much too difficult.
To live in poverty is difficult, but when one thinks most everyone else lives the same way, it becomes a common burden to be carried. However when one glimpses the golden castles with 2 Subzero refrigerators and a golden Cadillac SUV Chariot on their phones daily, a caste not subject to life in a single room, with infinite mobility while the observer is chained to a deadend job in a dead end town, and then a golden credit card arrives in the mail…
Its not a gold plated collar to leash them to the life of a debt slave, its line of credit that leads to that castle that shimmers on their phones..
They are mal-educated, they know little of finance or even common sense.
They have been groomed to fail, and succeed wonderfully for the role written for them.