Happiness Index
How happy are we as a society? Were Americans happier 200 years ago than they are now? How does the zeitgeist, or "spirit of the times," affect the way we work, interract, and live our daily lives? The answers to these questions can have a profound impact on the economic health of a country or demographic group. By studying various metrics, we can get a pretty good gauge of how Americans feel about their situation, and we can compare and contrast that rating to both other points of time and other locations around the world. We call this study the "Happiness Index."
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Household
Debt $16.5T 17 Nov 2022 |
As we near a possible recession, Americans hit a new record of household debt
Let’s put some gargantuan numbers in perspective. The annual US GDP, or the total value of all goods produced and services provided within the country, is currently $25.66 trillion—far and away the largest in the world. Sadly, like the talented athlete with a fat new contract but little financial control, the country is currently $31.26 trillion in debt. The next-largest number is reserved for the US consumer, otherwise known as the world’s golden goose. Despite concerns over a coming recession, household debt in the US just rose at its fastest pace since 2007, bringing the figure up to a whopping $16.5 trillion. Most disturbingly, credit card balances rose more than 15% from last year, the biggest spike in two decades. Despite the Fed funds rate sitting at 4%, the average credit card carries a 20% interest rate, with the average store-branded credit card charging 26.72%. Total debt jumped $351 billion during the July-through-September period alone—the largest quarterly increase since 2007 as well. Interestingly, the 8.3% year-over-year jump in total debt exactly matches August’s inflation read. While the rate of inflation cooled to 7.7% according to October’s CPI report, something tells us the $16.5 trillion figure will not drop. In fairness, outstanding mortgage balances account for some $11.7 trillion of the aggregate debt, followed by $1.5 trillion in both auto loan and student loan debt, and $1 trillion worth of credit card balances. The remaining amount consists of mortgage originations, or loans taken out against the value of one’s home. Sadly, many of these loans are initiated to pay down credit card debt; balances which have a tendency to build right back up. These are not good data points going into a turbulent economic period. As interest rates were low and student loan interest was placed on hold, Americans had the perfect opportunity to draw down their personal debt levels. Many did just that, but too many others decided to wantonly spend despite rising prices. And why not? The government has no problem spending money it does not have. |
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Retail
Sales |
What in the world happened to the glowing reports on holiday retail sales, and which releases do we choose to believe? (14 Feb 2019) Just a few months ago we wrote about the strong holiday retail sales figures, as noted in a release by Mastercard SpendingPulse. On Thursday morning, Dow futures went from up nearly double-digits to down nearly double-digits after a Commerce Department report flew in the face of those rosy numbers. What gives? How can two data points be so different for the same time period? The Commerce Department's Advance Monthly Retail Trade Report shows a drop of just over 1% in consumer spending for the last month of the year, against expectations for a gain. Drilling down into the report, it gets even more depressing: outside of vehicles and building materials, every retail category dropped, with department store sales falling 3.3% year over year (YOY)—the weakest retail sales figure in nearly a decade. We could chalk it up to the rise of the online retailer, but if we dig even deeper into the Commerce Department's figures we find a 3.9% decline in sales for mail-order and e-commerce vendors. After Wall Street digested this sour breakfast, the only thing keeping the indexes from falling further was the premise that Jay Powell just lost more oxygen for his rate hike argument. We have a different takeaway, however. The press gave this report way too much airtime. Back in December (it seems so long ago), consumers were dealing with two months of a plummeting stock market, talk of a slowing global economy, and the specter of a government shutdown (you can bet that somewhere around 800,000 government workers cut back on Christmas spending leading into the actual event). Furthermore, we reject the argument that adding more to our $1 trillion outstanding credit card balance by spending with abandon is somehow good for the economy. Yes, we are chronically drilled with the cliché that the US consumer accounts for two-thirds of GDP, but padding an economy with more consumer debt is an unsustainable condition. Maybe, just maybe, the American consumer became a bit more responsible this past Christmas season. The press made too much of this report, and we probably did as well. After decades of following government releases on the state of the economy, we have been amazed at just how often they (the releases) have been quickly refuted with new data. We expect that willl be the case this time as well.
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Retail
Sales |
Christmas shopping rose a healthy 5.1%, but another metric is even more impressive. (26 Dec 2018) $850 billion. That is the amount Americans spent during the 2018 holiday shopping season. That figure represents a 5.1% increase over last year—and the strongest number in six years, according to Mastercard SpendingPulse. But there is an even more impressive number in the report: online sales rose nearly 20% from last year. This means that retailers who have embraced this new online reality should continue to excel, while those who have put forth a halfhearted effort into building their online presence will continue to struggle. Besides the obvious winners such as Amazon (AMZN), who had done the best with this strategic shift? Walmart (WMT) and Target (TGT) have both put a massive effort into their respective online shopping experience. The worst? Sears (SHLD), Kmart (SHLD), and Marshalls (TJX). With the beaten-down market, there are a lot of great opportunities in retail, but beware of the shops who have not "figured it out" yet; the future of the retailing experience, that is. We expect big winners to include: Amazon, Walmart, Target, Best Buy (BBY), and Macy's (M)—though that last example could end up going either way. Of course, all of that online ordering requires a shipper to deliver it to your door. Here, we like FedEx (FDX), hands down. It happens to be on sale right now as well!
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Consumer
confidence |
Consumer confidence jumps to its highest level since 2000. (28 Aug 2018) October of 2000, nearly eighteen years ago. That is the last time the American consumer was as confident as they are right now. The surprise reading, from a report conducted by Nielsen for The Conference Board, hit a remarkable 133.4 in August, up from a very high 127.9 reading in July. To put this in perspective, the Consumer Confidence Index hit a low of 38 in October of 2008 in the midst of the financial crisis. The American consumer is the engine for growth, not only in America but around the world. A full 70% of economic activity in the country, in fact, comes from consumer spending. The Consumer Confidence reading is also important to the Fed, as they use this number as a metric to help them shape monetary policy. Suffice to say that we can expect a rate hike at their September meeting.
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Retail
Sales |
US retail sales post biggest pop in six months—double estimate. There is no doubt about it—the American consumer is feeling better about his/her situation. More evidence of that came in the form of the Commerce Department's retail sales report, which shows the metric climbing 0.8% from April to May, or double what economists had predicted. April's figure was also revised higher. Of note: gas sales were not included in the data, which makes the report all the more impressive, considering the spike in prices at the pump. A generational-low unemployment rate, lower taxes, and a rise in take-home pay were all probable factors leading to the increased level of consumer confidence.
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Cali
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California ranks dead last for quality of life. (08 Jun 2018) It is so sad. Such a naturally beautiful state. According to the US News Best State Rankings, California came in 50th for "quality of life," just below New Jersey. Remember Horace Greeley's famous 1865 call to "Go West, young man!"? Doubtful he would say that today. The Golden State ranked 46th for "opportunity." The "fiscal stability" ranking wasn't much better, with only seven states lower on the totem pole. Homelessness has been surging in California, along with rents and housing prices; ironic, considering the number of residents fleeing the state. Then again, most of those fleeing are in the lower- and middle-class, so the wealthy are still there to pay the onerous state and local taxes. Did we mention that the California legislature approved a 40% increase in the state excise tax on gasoline last year? At least the state wasn't dead last in the number of residents packing up and calling it quits—that honor went to New York. California was second, and New Jersey was third. There must be a common thread there somewhere; if only it could be identified.
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Financial
Status |
Americans felt better about their economic situation in 2017, Fed finds
(22 May 2018) An annual survey conducted and released by the Federal Reserve shows that Americans are feeling better about their financial status. The survey found that 74% of the respondents felt "at least okay" with respect to their finances, up from 70% in 2016. Of note: the demographic group with the strongest uptick in the survey was "lower income households." What were the major factors behind the improved numbers? A generational low unemployment rate and an uptick in wages were cited as the main catalysts. Nonetheless, a full 40% of respondents said they still worry about their ability to pay the bills were they to be hit with a financial hardship, such as a sudden illness or loss of employment. |
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Retail
Sales |
Retail sales jump in March on the back of auto sales, higher gas prices
(16 Apr 2018) US retail sales rose 0.6% in March, with a full 50% of that figure fueled by a spike in auto sales and the higher price of gasoline. The Department of Commerce report also revealed a bright quarter for internet retailers, major appliance shops, and home furnishings stores. Home improvement centers (think Home Depot and Lowe's) showed a decline, but that could have a lot to do with the extended winter being felt throughout wide swaths of the country. The increase in the sales of both autos and major home appliances is a good sign for consumer activity moving forward in 2018. |
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Retail
Sales |
US retail sales surge nearly three times better than expected in November
(14 Dec 2017) The Great Return of the Consumer, circa 2017. The first bit of evidence is in: US consumers are feeling better about the economy, and they are showing their confidence with their wallets. The US Commerce Department just released retail sales figures for the month of November, and it was nearly three times better than expected: a rise of 0.8% instead of the 0.3% jump expected. Furthermore, October's retail sales figure was revised up from +0.2% to +0.5%. These figures, coupled with other recent economic data points, show a positive and sustained trajectory for US economic growth. |
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Debt
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(18 May 2017) US household debt hits record levels. The Federal Reserve Bank of New York reported that total US household debt reached a record $12.73 trillion in the first quarter of 2017—a $149 billion increase from the previous quarter. That amounts to $39,169 of debt for every man, woman, and child in the country. Mortgage debt was the largest category, clocking in at $8.63 trillion, followed by student loan debt ($1.34 trillion), auto loan debt ($1.17 trillion), and credit card debt ($1 trillion).
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Consumer
confidence |
(28 Mar 2017) Consumer confidence soars to 16-year high. Just when you think the consumer confidence level can't possibly get any higher than it was in January, along comes February's read. The Conference Board announced that Americans' confidence in the US economy grew to 125.6—the highest read since 2000. This flew in the face of economists' predictions that the huge January read of 116.1 was an anomaly, and that the rate would actually fall to 113.8 in February. We wonder why Americans have so much confidence in the economic direction of the country all of a sudden?
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Consumer
confidence |
(28 Feb 2017) Consumer confidence rockets to 15-year high. US consumer confidence has spiked to its highest level since July, 2001. The index, whose reading came in at a whopping 114.8, measures both consumers' assessment of current economic conditions in the country as well as expectations for the near-term future conditions. This reading goes hand-in-hand with the 12 straight record days, thus far, recorded in the Dow Jones Industrial Average. Putting their money where their mouth is, consumer spending also expanded at a health 3% clip. Now, if we could just figure out the disconnect between what actual Americans are telling us and what the press is reporting. It is a mystery.
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