WSJ Your Money Briefing - How Do Americans Feel About Their Finances? It’s Complicated

Episode Date: September 10, 2024

The effects of the pandemic on the U.S. economy has left many consumers with feelings of both optimism and angst . Wall Street Journal reporter Joe Pinsker joins host J.R. Whalen to discuss the state of Americans’ finances, including their savings, debt, and retirement savings.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Ecolab Water for Climate. Less water, more growth. Results will vary. Learn more at Ecolab.com slash EWC. Ecolab Water for Climate. Transforming the way the world thinks about water. Here's your money briefing for Tuesday, September 10th. I'm JR Whalen for the Wall Street Journal. Ask your friends or neighbors, how you doing? And their answer might depend on the state of their finances. Consumer sentiment has improved in the past two years as inflation has cooled off. But I think the instrumental thing to focus on in terms of people's psychology is just

how prominently inflation looms in people's minds, even if their pay is going up. We'll talk to Wall Street Journal personal finance reporter, Joe Pinsker, after the break. MUSIC Cyber attackers are using AI and creative ways to compromise users and breach organizations. In a security landscape where you must fight AI with AI, the best AI protection comes from having the best data. Zscaler has extended its Zero Trust architecture with powerful AI engines that are trained

and tuned by 500 trillion daily signals. Learn more about Zscaler Zero Trust plus AI to prevent ransomware and AI attacks. Experience your world secured. Visit zscaler.com slash Zero Trust AI. Are you better off than you were five years ago? Salaries have risen since 2019, but that's not the full picture. Wall Street Journal personal finance reporter Joe Pinsker joins me. Joe, you and the personal finance team looked at snapshots of people's personal finances today as compared to 2019.

Why go back to 2019? It remains this really powerful anchor point mentally for people to compare back to. It's a time before the pandemic. It's also a time before really high inflation and it's a time when people felt pretty good about their finances. So even though it's sort of receded into the past time-wise, it's still pretty mentally present for people How scary is that that five years ago seems like ancient history? It's a little bit unbelievable In your story, it says Americans have more money in the bank and slightly less credit card debt relative to income compared to 2019

Why don't they feel better off than they did five years ago? A lot of it comes down to inflation. And so in the consumer sentiment data that we can look at, people are not feeling as good about their money right now as they did in 2019. But that said, consumer sentiment really fell to a recent low in 2022, and it's rebounded quite a bit since then. So people have been feeling a bit better as inflation has cooled, but the pain is still present, especially relative to 2019.

And credit card debt relative to income has fallen and then risen since 2019. What's driven that increase? During the early phases of the pandemic, people's spending contracted, they had fewer things to spend on, and they were able to pay down more of it. So Americans credit card debt relative to income actually fell in 2020 and 2021. But since then, it's ticked back up and it's increased, but at the same time, it's more or less on par with what it was in 2019.

So we're kind of quote unquote back to normal on that. You cited data from the Labor Department that says that Americans are making a bit more money than they did in 2019. And that's even after adjusting for a sharp increase in inflation since then. Has that brightened people's sentiment any about their finances? In some way, yes, because consumer sentiment has improved in the past two years as inflation

has cooled off. But I think the instrumental thing to focus on in terms of people's psychology is just how prominently inflation looms in people's minds. Even if their pay is going up, the fact of higher prices is probably just going to weigh a bit more. And so the idea of making more money, but then having it eroded by higher prices is just kind of frustrating. During the pandemic, we saw the savings rate jump as a result of people in lockdown and not going out shopping, but also government stimulus payments coming in. How has the savings

rate fared since then? The saving rate is a lot lower than what it was during the pandemic, and it's even notably lower than what it was throughout 2019. And that may sound like a worrying thing, like people aren't able to put away money, but one economist I was talking with said that he interprets this as just a sign that people are feeling confident about the price of their home But one economist I was talking with said that he interprets this as just a sign that people are feeling confident about the price of their home or the value of their stock

portfolio or the cash flow they're getting from fixed income. Those things have all been up. And so being able to save a little less is something that people might be doing from a place of confidence more than anything else. You mentioned stocks and the stock market has risen significantly since 2019. How has that affected people's emotions? Obviously the money that many people have in the stock market is not money that they have access to on a daily basis, but when they take a look at their accounts and see

that the number has gotten bigger quite a bit over the past couple of years, that makes people feel a bit more confident and maybe comfortable, possibly about their retirement. Car prices have shot up since 2019 and the average annual percentage rate on a new auto loan was 7.1% in August. How have people adjusted for that? Painfully is the short answer, but maybe one creative area that I've actually looked into in previous reporting is people trying to squeeze more life out of their current cars. If you look at the data on average vehicle age in the U.S., it has gone up nearly a year

over the past five years. The current average age of a U.S. vehicle is 12.6 years. The cost of car ownership these days has inspired many people to renew their commitment to driving their cars until the wheels fall off. And one of the most closely watched components of the economy is housing. Both buyers and sellers have felt the squeeze of a tight market. What can we expect going forward? I suppose the truest answer is that nobody really knows, but investors expect that the Fed will be cutting rates soon, which likely would mean that mortgage rates might

start dropping. It's unlikely, it seems, that we would return to the sort of golden era that we were talking about in 2019 of super low interest rates. But there's a chance that lower mortgage rates in the coming months or years might give a bit of relief to buyers and sellers in what's been a tough market. For people listening, what are some of the biggest takeaways from your reporting? We have a tendency to look at these sort of big picture aggregate economic data points

like consumer spending and GDP growth. Those are, of course, very helpful in figuring out the state of the economy. For this story, we also wanted to kind of look at what a quote unquote typical Americans finances look at right now, especially as a counterpoint to some of the bigger picture data points that we often fixate on as people who follow the economy. That's WSJ reporter Joe Pinsker. And that's it for your money briefing. We'll be back tomorrow with WSJ's Ray Smith

to discuss how companies are finding ways to pay workers less. This episode was produced by Ariana Osborne and Zoe Kolkin with supervising producer Melanie Roy. I'm JR Whalen for the Wall Street Journal. Thanks for listening. you