MUMBAI, June 4 — Signs of resilience in the U.S. labour market are masking growing financial stress among households, raising concerns about the durability of consumer spending and the broader economic outlook, according to a new macroeconomic assessment by Bandhan AMC’s Senior Economist Sreejith Balasubramanian.
In the latest edition of “Macro Shots,” titled “US Households: A Fragile Balance,” Balasubramanian noted that while April job openings unexpectedly rose to 7.6 million from 6.9 million in March, the improvement was narrowly concentrated, with nearly 91% of the increase coming from the Professional and Business Services sector. At the same time, hiring activity, employee quits, layoffs and discharges all declined, indicating a labour market that remains largely static despite pockets of strength.
The report argues that household finances are showing increasing signs of strain. Both nominal and real personal income growth have weakened in recent months, while personal savings growth has remained negative for nearly two years and has deteriorated further in recent quarters. According to Bandhan AMC’s analysis, the slowdown suggests consumers may be relying more heavily on borrowing to sustain spending.
Adding to concerns, outstanding credit card balances remain elevated, while delinquency rates have climbed to their highest levels in 15 years. The report notes that delinquency rates are now approaching levels witnessed during the 2008 global financial crisis, particularly among lower-income households. A chart included in the report shows credit card delinquencies rising sharply relative to other categories of consumer debt.
The assessment comes at a time when inflation risks remain tilted to the upside, complicating the outlook for U.S. monetary policy. While labour market data has recently surprised positively, Bandhan AMC cautions that the combination of slowing income growth, shrinking savings buffers and rising debt stress leaves the average American household in a vulnerable position.
“With rising upside risks to inflation, a labor market that has recently shown some strength but is largely static and in a delicate equilibrium, falling personal income and savings growth, and rising credit card delinquencies, the average U.S. household is in a fragile balance,” Balasubramanian wrote.
Market participants are closely monitoring household financial conditions as consumer spending accounts for nearly 70% of U.S. economic activity. Any sustained weakening in household balance sheets could have implications for economic growth, corporate earnings and the Federal Reserve’s policy trajectory in the months ahead.