Due to a significant surge in non-housing related debt (student loans, credit cards, auto loans, and other), households in the U.S. have amassed a record debt level now topping $12.7 trillion. Since the great financial crisis it has been student and auto loans that have fueled this growth. Yet, few seem to worry about the long-term implications from this debt hangover, one that a nap and a few asprin won’t cure!
We have seen GDP growth in the last 15 months (1.6% for 2016 and 1.2% for Q1’17) fall below the average growth rate during what has been an anemic recovery since the GFC. Given that we are a consumer lead economy, it is likely that the debt burden is beginning to impact consumption.Expectations for a robust second quarter seem to be fading, as one weak report after another is released. US employment would suggest that our economy is performing on all cylinders, but more than 600,000 workers left the labor force last month. We could see a dramatic reduction in the unemployment rate if that pace were to continue.
Expectations for a robust second quarter seem to be fading, as one weak report after another is released. US employment would suggest that our economy is performing on all cylinders, but more than 600,000 workers left the labor force last month. We could see a dramatic reduction in the unemployment rate if that pace were to continue.
However, my greatest concern is the impact that this debt has on one’s ability to fund a defined contribution plan. Given that real wage growth has been stagnant since roughly 1999, while the cost of medical, housing and education have ratched up significantly, there is little discretionary income available to the “average” worker to feed a retirement account. The failure to do so early (and often) will ahve long-term implications for the account balances that can be amassed.
We’ve frequently written about the impact that the demise of DB plans will have on our labor force. The social and economic implications of our failure to provide an adequate retirement will be grave. The failure to create higher quality jobs with competitive wages is beginning to take its toll.
Ryan ALM Blog 
Good article Russ. Stock price! Stock price! Stock price! American corporations are so focused on quarterly earnings that they really don’t give a darn about their employees. The gap between the rich and poor keeps growing and growing. Where will corporations be if nobody can buy anything? I remember seeing photos in local newspapers of men selling shoes at a local shoe store in a suit and tie feeding a wife and four kids. And owning a home! You think that’s possible today, even in poor neighborhoods? Granted, we have a better lifestyle than 3/4 of the world but where is the real standard of living? The new Republican Health Care Act will raise premiums even higher for the middle class. Again, whose going to buy the goods if you can’t afford them? And how can you possibly save for retirement when most of America lives paycheck to paycheck?