Updated March 25, 2023
Bill Chen, CFA
The Piggy Bank
💰 The Post-Covid Debt Boom
Millennials Fall Behind
Economically speaking, the pandemic was the proverbial frying pan to the post-pandemic era’s fire.
While the pandemic left many furloughed or entirely without jobs, enhanced unemployment benefits and stimulus checks helped soften the blow and kept the American economy chugging along. But now, ironically, many consumers are feeling more financial pain.
This is especially true for millennials. Over the past year, the debt balance for Americans in their 30s hit more than $3.8 trillion, a 27% increase from the pre-pandemic period. This was the quickest 3-year debt accumulation since the 2008 financial crisis.
Compared to pre-pandemic levels, more millennials are also behind on credit card payments and other bills such as car payments.
Dealing With Inflation
Perhaps the biggest pain point in the post-COVID economy is the decades-high inflation forcing Americans to spend more on everything from gas to groceries to rent. Thanks to surging costs across the board, many families have had to dip into either savings or credit just to make ends meet. To fight this inflation, the Federal Reserve has raised interest rates several times over the past year. While this has helped to curb inflation, it has also pushed up interest rates on credit cards, mortgages, and other types of loans. This creates a dangerous spiral for many Americans, who lean on credit cards to pay their bills, while the interest rate on credit card debt creeps up simultaneously.
All in all, the increased debt load makes it harder to save for financial goals like retirement or a down payment on a home.
Debt levels may look dismal. But it isn’t all bad news.
For example, the unemployment rate is at its lowest point in 50 years, signaling a strong job market. In fact, some companies have already committed to hiring thousands of employees in 2023. Additionally, despite still sitting at a higher-than-average rate of 6.4%, the inflation rate has decreased for seven straight months.
With any luck, the rate of inflation will continue to decline, slow the unaffordability crisis, and give Americans some much-needed breathing room.
❓ The Fed’s Unsettling Predicament
The Federal Reserve, along with most top policymakers, rely heavily on data to guide their decisions. For example, when data came in that inflation was getting out of control, the Fed responded by quickly raising interest rates to cool the economy.
But recently an interesting – albeit unsettling – question has been raised: what if the data that the Fed is acting on isn’t accurate?
Take This Survey!
Even in today’s technologically-advanced world, the go-to way to collect data has remained the same for over a century: surveys. To this day, sending out surveys and measuring the responses is how the government collects crucial data related to the labor market and inflationary trends, which in turn drives related policy decisions.
However, the number of people responding to these surveys has been declining for years – and even more so during the pandemic.
Here are the current response rates for major government surveys:
Job Openings and Labor Turnover Survey (JOLTS): Response rate is around 31%.
Employment Cost Index: Response rate has fallen to below 50% from 75% in 2021.
Current Employment Statistics survey: Response rate has fallen to 45% from 60% in 2019.
So why the decline? Your overflowing junk folder could be the culprit. Over the years, spam has become a legitimized marketing tactic. Now, with consumers subject to spam mail, junk emails, and cold calls at a constant rate, they’re more likely to automatically ignore requests, even important official surveys. In fact, some people might be sending government surveys straight to the trash without even realizing it.
This is important because the data from these surveys helps guide the Fed’s decision-making – which, in turn, impacts your money. The Fed’s interest rate decisions typically make it either more or less expensive to borrow money. So, if the Fed decides to raise interest rates again at its next meeting, it would impact your ability to buy a home or a car in the coming months. The Federal Reserve is still fighting to get inflation down from its stubbornly high levels. But, if it doesn’t have consistent data that shows that the economy is improving, it could mean more interest rate hikes ahead. So, next time you get a message from a government agency telling you “your opinion matters”, consider responding. Turns out, they’re right.
🚙 The Skills Gap in Electric Vehicles
The streets of the world could be dominated by electric vehicles in the near future. Most major economies are leaning heavily into EV tech. The US already offers tax credits for adopting EVs. Meanwhile, many European countries have committed to banning the sale of new gas-powered cars over the next decade. While most agree this would be a net positive for the world, new technology always brings with it a slew of new problems, too.
In particular, the rapid transition from gas-powered automobiles to electric ones could lead to a shortage of mechanics prepared to work on these new EVs. In fact, industry experts predict that this skills gap could start to appear as early as 2029.
An Emerging Career?
As the number of electric vehicles grows, so does the labor required to fix and maintain them. This is also true for charging stations, batteries, and other related EV tech.
Electric engines are completely different from internal combustion engines. Existing auto shops that have been working on traditional gas engines for years. Expanding their service offerings to EVs goes far beyond simply hanging a new sign in the window.
Additionally, EV maintenance brings up two main issues for the electric vehicle industry: convenience and price. To start, EV owners might have to travel a lot farther than they expected to just to get their cars serviced. On top of that, with fewer technicians to fix cars, it would inevitably cost more to get your EV fixed.
Closing the Gap
While the transition to electric vehicles will take years to play out, it will undoubtedly lead to significant demand for skilled laborers that can conduct maintenance on EVs. And, for consumers considering purchasing an EV in the upcoming months or years, keep in mind that the cost and convenience of maintaining your new car might not be as simple as driving to your local garage. Just like any new solution, the transition to electric vehicles is bringing along plenty of new problems that need to be addressed. But the long-term environmental benefits should be more than worth the short-term struggles.
Mortgage rates dropped below 6% in January, which brought in a rush of new buyers to the market. However, this sales rush will likely be short-lived. The average mortgage rate is now back up to 6.88%.
Chipotle launched new meals sponsored by the 2022 Fittest Man and Woman on Earth. This is a strategy similar to one McDonald’s used when it offered meal combos sponsored by rappers Cardi B and Offset.
Snap Inc is rolling out an in-app chatbot powered by ChatGPT called My AI. The bot will be available to Snapchat+ subscribers and will provide recommendations for things like gift ideas, weekend plans, or recipes.
Xiaomi just debuted its new pair of augmented reality glasses, the Xiaomi Wireless AR Glass Discovery Edition. The glasses are slated to join an AR market currently dominated by Microsoft and Google.
Disney World is reversing a pandemic-era policy requiring reservations to visit each park. In January, the House of Mouse made price adjustments across its parks, following negative customer feedback.
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