The downward trend in US household incomes may continue, potentially jeopardizing spending and leading to a recession in the next 3-6 months.
Savings and Resources
The savings rate is near historic lows, having declined sharply over the last 4 months, and the stock of excess savings is almost depleted. There are no available free savings resources.
The US budget deficit is near highs amid relatively tight fiscal policy, especially in the context of household income support. There are no available resources for anti-crisis fiscal support.
Gross Income
The structure of gross income is as follows: wages and salaries account for 62.2%, business and farming for 8%, rental income for 4.3%, capital income (interest and dividends without capital gains factor) for 15.8%, and personal transfers for 17.7%, with state transfers accounting for 17.2%.
Rental Income
Rental income refers to the income generated from the rental of real estate in favor of individuals, such as apartments, houses, commercial premises, and other properties, adjusted for capital consumption (minus costs associated with the maintenance, repair, and upkeep of real estate).
Factor of Total Income (FOT)
FOT includes salaries, bonuses, and bonuses, along with employer contributions to pension and insurance funds, as well as state social insurance. FOT is national and takes into account the number of employed persons, the structure of the economy, the number of hours worked, and changes in hourly wages by industry.
In nominal terms, FOT is growing at 5.2%, which is relatively high by historical standards. However, it's essential to consider the inflation-adjusted FOT, which has increased by just 1.7% over one year, 2.5% over two years, and 4.3% since February 2020, with an average annual growth rate of 1.2% during that period. The norm from 2014 to 2019 was an average annual growth rate of 2.1%.
There has been a significant slowdown from the 3.5% growth rate in June 2023. The situation is expected to worsen due to several factors. There will be major structural adjustments after COVID is over, leading to declining investment, slowing employment growth, and stabilizing labor shortages, all of which will impact wages.
Conclusion
In conclusion, the United States is currently experiencing a troubling downward trend in household incomes, alongside historic lows in savings rates and a nearly depleted stock of excess savings. The budget deficit remains high, and there are limited resources available for anti-crisis fiscal support. The income structure reveals a heavy reliance on wages and salaries, with potential challenges ahead as structural adjustments occur post-COVID, leading to declining investment, slowed employment growth, and stabilization of labor shortages.