“Are We There Yet?”: The Saga of the Economy So Far in 2024

Everyone knows the frustration of sitting in a car in traffic, waiting to arrive at a destination that doesn’t seem all that far on a map, but feels like it’s taking an eon to reach. Although the seconds tick by normally, you might be infinitely aware of them, just from the discomfort and anxiety of feeling stuck in place. You think about where you’re going, who’s waiting for you to get there, and maybe even how hungry, thirsty, or tired you are. Even once you’re making progress again, it still seems like you’ll never quite get where you’re going. The economy and promises of changes for business owners and consumers alike are in a similar situation right now. With rate cuts continually being pushed back, prices remaining high, and many businesses and consumers scrambling to keep up with the rest of the pack, better economic conditions seem like a moving target these days. There are some indicators that show promise in the meantime, though. Consumer & Business SentimentWhile consumers are still spending at a stable rate, it’s clear that the wait for prices to fall on everything from groceries to loans is weighing on them. After several years of sky-high price tags on consumer goods, groups with higher income levels have persevered while middle- and lower-income households are struggling. Data from Q1 of this year shows that, where investments and other assets are concerned, US household wealth hit a record high because of the stock market's record run and gains in real estate. Income groups who were not able to take advantage of high rates on investments balance out their wealthier counterparts to create a mixed bag when it comes to how consumers are feeling.In a slightly encouraging trend, the Small Business Optimism Index increased by 0.8 points to a total of 90.5 in May, though the index is still below the historical average of 98. The prolonged impact of inflation and higher borrowing costs has taken a toll, but may finally be subsiding. With the November election approaching and the Fed’s signals that a rate cut is likely on the way, some small businesses are anticipating a light at the end of the tunnel, while other business owners are remaining doubtful.Economic OverviewThe unemployment rate in June crept up to 4.1%, wage growth is stabilizing, and spending continues even at a slower rate. Resignation rates are dropping off and the current inflow of immigrants has helped decrease wage pressure. When reviewing the most current consumer sentiment data, we see an incremental rise in election bias, which, on a historic basis, only grows as we get closer to the election, which makes it even harder to parse current and future spending behavior and business activity. Also, the market is predicting the first rate cut to happen at the September FOMC meeting. Banking LandscapeDespite rates staying high and an increase in regulatory scrutiny, banks are feeling relatively secure. In fact, financial executives are reporting few changes to their H2 plans, indicating a more stable position and more predictable data. One troubling trend to look out for is an increase in credit card and auto loan delinquencies, once Q2 data rolls in. Housing TrendsAs far as the housing market, the more things change, the more they remain the same. Mortgage rates are still at their highest point in over 20Ys and home prices are creeping upward again. The one break from recent trends is that housing inventory is actually up 18.5% YoY, according to data from the National Association of Realtors. Yet, despite would-be purchasers having more properties on the market to choose from, homes are staying on the market longer — an average of 24 days in May, compared to an average of 18 days a year before. Chairman Powell said after the committee’s June meeting that the best bet for the housing market to normalize is for inflation to come down so that the Fed can decrease rates. Overall, while consumers and businesses alike are awaiting changes in the economy, there are still indicators that things are moving in the right direction.