Liking your present situation right now? Your job, your house, your car, you can keep it and you may have to do so. Buying a new car, house, or getting a different job may be more costly and not pay off. Even if you are not so satisfied, chances maybe you having to manage your pennies and stay put. Making a major economic change today involving costly upgrades, may not be advantageous, right now. Getting far out on a limb in a new job or with greater costs may be too risky. It is what author Emily Stewart at Business Insider identifies as a “trapped in placed economy.” University of Michigan’s director of consumer surveys Joanne Hue a has another name for it. “If you are trying to move, buy a car, whatnot, then you have all these bad
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Liking your present situation right now?
Your job, your house, your car, you can keep it and you may have to do so. Buying a new car, house, or getting a different job may be more costly and not pay off. Even if you are not so satisfied, chances maybe you having to manage your pennies and stay put. Making a major economic change today involving costly upgrades, may not be advantageous, right now. Getting far out on a limb in a new job or with greater costs may be too risky.
It is what author Emily Stewart at Business Insider identifies as a “trapped in placed economy.”
University of Michigan’s director of consumer surveys Joanne Hue a has another name for it.
“If you are trying to move, buy a car, whatnot, then you have all these bad buying conditions on top of everyday high prices, so it’s a double whammy.”
The past four years have been filled with upheaval, even though economic news says differently and things appear to be on the upswing. While there’s been improvement on a macro level, on a micro day-to-day level, there’s a real sense of stasis. Inflation is falling, but prices are still much higher than they were before the pandemic. Interest rates are elevated. The labor market has cooled off somewhat, making it less advantageous to hunt for a new job. Everything seems stuck, and if you’re looking to switch it up, it’s going to cost you.
Or it may be a time to wait for a more advantageous time.
Take the housing market. Home sale prices have come off of their 2022 peak. However, they’re still 47% higher than they were in 2019. This, according to the S&P CoreLogic Case-Shiller National Home Price Index. Even if you manage to find a deal, getting a loan is going to be costly. Thanks to the Federal Reserve’s interest-rate hikes, mortgage rates are much higher than they were just a couple of years ago and somewhere around 7%, compared with just about 2.5% in 2021.
Not only do these high rates weigh on prospective buyers, anyone thinking of selling their home hello, boomers) is likely to be turned off as their current mortgage rate is probably lower than a new one. With both buyers and sellers feeling the squeeze from higher mortgage rates, and homebuilders unable to keep up, the inventory of available homes has collapsed. And as much as a lot of people would like to see a housing-market bubble burst, that’s probably not in the cards.
The car market is in a similar situation. Vehicles are expensive. Loans are getting tougher to come by, and even if you manage to get credit, elevated interest rates are making financing costly. Car insurance is much more than it used to be, too. The Bureau of Labor Statistics’ most recent consumer price index indicates the cost of car insurance is up by more than 20% over the past year.
The chief economist at the Conference Board Dana, Peterson stated its consumer confidence survey suggests people have increasingly been scrapping plans to buy homes and cars. Given the economic challenges, that’s not surprising. Adding, consumers expect inflation and interest rates to come down. This suggests many buyers may hold off on some big purchases until things improve. Adding . . .
“If you’re a rational consumer, you’ll say to yourself, ‘Well, maybe I’ll just wait,'” she said.
The issue being not everyone is in a position to wait. It’s one thing if you want to buy a new car because you’re bored with the old one. It is another thing if your car breaks down and you can’t get to work. Regardless, waiting isn’t particularly fun.
When it comes to work, the vibe is static, too. Yes, the labor market is strong. However, it is not a great time to go looking for a new job. Companies are not laying people off en masse, but they’re also not bringing employees on board quickly. Hiring has slowed significantly from where it was in 2021 and 2022. And hiring is much lower than one would expect with the current unemployment rate.
Senior employment-policy analyst Matt Darling at the Niskanen Center (center-right think tank adds) . . .
“Employers are hiring as if there’s a relatively weak labor market, not a strong one.”
The downshift in hiring has also tipped the balance of power back toward employers. Wages are still on the upswing, but switching jobs may not come with as much of a pay bump as it did during the Great Resignation of 2021 and 2022. That may be fine for those who are happy in their jobs, which many people are. It is not so great for those who are feeling a little antsy or underappreciated. For those Americans who find themselves out of work and looking for a new gig, it’s going to take a bit of time. Darling told me, for the unemployed, it takes about twice as long to get a job as it did before 2008. A job search taking10 weeks at a similar unemployment, now takes 20. Darling adds . . .
“That’s obviously a huge source of dissatisfaction, because 20 weeks is a long time. What’s that, five months to be looking for a job?”
What this all translates to is a scenario where some Americans feel trapped. They can put food on the table and fill up their gas tanks, albeit at a price they’d rather not be paying. But it’s hard and expensive to move up the ladder in many meaningful ways. In a consumerist society encouraging people to want more and a culture that prizes itself on economic mobility, this level of stillness is uncomfortable. While it’s still possible to get a better job or a new house, those things feel like they’re off in some nebulous future, out of your control.
Tamara Charm, a partner in consumer insights at McKinsey, told me that a lot of people are shifting in the opposite direction and downgrading where they can. At the grocery store, some people are switching to private labels and generic brands to save money. She added that while people feel boxed out of big-ticket goods, they’re still spending on treats, on vacations, and on cosmetics. Charm . . .
“What we’ve seen is that consumers are both wanting to trade down, given all these economic concerns, but at the same time they want to splurge.”
If you can’t buy a house, you may as well get that plane ticket.
Americans are much more bullish about the economy than they were six months ago, but they’re not as satisfied as they were in, say, 2019. It is also not clear if they ever will be. It’s impossible to predict what’s ahead, and while the present is decent, the feeling of stuck in the present kind of sucks.
The Trapped Economy: Americans Can’t Buy a Home, Car, or Find a New Job