Confidence among America’s chief executive officers (CEOs) has just experienced its steepest drop since 1976, according to a new survey.

When concern rises at the top, it often trickles down. If business leaders are bracing for trouble, it may be time to prepare yourself. The good news is that a few smart steps now could put you in a much stronger financial position.

Survey shows a drastic drop in CEO confidence across the U.S.

The Conference Board is a nonpartisan, nonprofit organization that analyzes business conditions and provides insight to executives. As part of this effort, they keep a finger on the pulse of business leaders with regular surveys of chief executive officers.

A May 2025 survey found that CEOs have become more concerned about the economy in recent months. In fact, the decline since the previous quarter was the largest in the survey’s history, which dates back to 1976.

How worried are America’s business leaders? Here are some signs that concern is rising:

• 82% of CEOs said economic conditions had worsened over the past six months, compared to just 2% who said they had improved.
• 69% said conditions in their industry had deteriorated, compared to 7% who reported improvement.
• 64% expect economic conditions to decline further over the next six months, while only 18% expect improvement.

How bad could things get? 83% of CEOs expect a recession in the next 12 to 18 months. That is up from just 30% late last year.

What is driving these concerns? The top three issues cited were:

• Geopolitical instability
• Trade and tariffs
• Legal and regulatory uncertainty

Overall, economic concern among business leaders is rising quickly, and that level of caution could influence broader decisions affecting jobs, wages, and investment.

How CEO pessimism can affect the workforce

CEO concerns are not always accurate predictions, but they often shape real decisions that affect employees. When executive confidence falls, it can ripple through hiring, pay, and investment plans.

Here are some examples of how CEO pessimism might affect the workforce:

• Slower hiring. One of the first things that happens when leadership faces uncertainty is a delay or cancellation of hiring plans. This may already be happening, as job growth has been sluggish so far in 2025.
• Wage increases become stingier. As demand for workers eases and budgets tighten, companies feel less need to pay up to retain employees. Your next raise may be harder to come by.
• Employee perks are trimmed. One way to cut employment costs without the morale hit of reducing pay is to eliminate some employee perks. Everything from the company picnic to 401(k) matching contributions could be affected.
• Investment slows. R&D, new plant and equipment, and ad campaigns are all expenses that do not pay off immediately. CEOs may become more hesitant to invest in the future during periods of economic uncertainty.
• Layoffs start. Once demand slows, companies may look to reduce headcount to protect the bottom line.

To some extent, CEO pessimism can become a self-fulfilling prophecy. When companies reduce spending and cut jobs, it can weaken the broader economy.

How to protect yourself in an uncertain economy

When your company’s head is worried about the economy, it can affect you in several ways. In response, here are some things you can do to get ready:

• Build a little cushion into your budget. Whether it’s a smaller bonus, having your hours cut or even losing your job, economic concerns could affect your take-home pay. This would be a good time to take a look at your budget to see which costs you can reduce or eliminate.
• Rein in borrowing. If you’ve been borrowing regularly to make ends meet, it would be wise to break that habit. If the economy worsens, look for lending standards to tighten. It might become harder to get new credit, and existing credit limits might even be cut.
• Raise emergency savings. If you don’t have one, this would be a good time to start an emergency fund. If you already have one, this might be a good time to build it up. If the job market weakens, more people may lose work, and it may take longer to find a new job. A larger emergency fund could help you stay afloat.
• Work on your credit score. This could help you retain access to credit even if the economy weakens.
• Update your job skills. Look for ways to increase your value to your employer. That may keep you off any layoff list. It would also make you a more attractive candidate if you have to find a new job.

Taking steps to prepare for a rough economy may not change what executives do next, but it could make a real difference in how well you weather it. Building financial stability now can help you feel more secure, even if the road ahead is uncertain.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

The post What falling CEO confidence may mean for your job, budget and credit appeared first on Credit Sesame.

The economy has had a nice run since the pandemic. After the initial shock, fourteen of the last sixteen calendar quarters have seen GDP growth. Employment has grown for 44 consecutive months.

It would have been wise for consumers to use these favorable conditions to pay down debt and bolster savings. Instead, they have been spending like the party would never end. That leaves many ill-prepared for what may come next.

Most areas of the U.S. are no longer growing economically

While the economy continued to grow throughout the first half of the year, the third quarter may not be going so well. The recently released Federal Reserve Beige Book for August 2024 suggests an economic slowdown.

The Beige Book is a compilation of reports from 12 Federal Reserve districts. This report found growth in just three of those districts. The economy was flat in four districts and declined in five.

Credit is getting tighter

A distinguishing characteristic of this economic expansion has record borrowing by consumers. If debt has fueled this expansion, slowing growth may be because the consumer is running out of gas:

• Total consumer debt has reached a record high, with credit card debt growing particularly fast. That’s especially troubling since credit card debt is more expensive than other major forms of consumer borrowing.
• The rate of serious delinquency (90 days or more overdue) on credit card debt has reached its highest level in over a dozen years.
• The charge-off rate for banks on consumer debt has reached the highest level since 2013, and the charge-off rate for credit card debt is the highest since 2011. Charge-offs are accounting adjustments banks make for debt they have been unable to collect.
• In response to the growing risk of consumer non-payment, bank loan officers have been tightening standards for credit cards for two years.

The bottom line is that credit is getting harder to come by and more expensive. That creates a headwind for the economy, not to mention making things harder for consumers with poor credit scores.

Savings and reserves are low

Credit is getting tighter, and consumers generally don’t have a lot in the way of reserves to fall back on.

Thanks to government stimulus checks and restrictions on activity, consumers built up a reserve of savings during the pandemic. A few short years later, though, they have burned through those stockpiles and dipped into other savings.

Over the past two-and-a-half years, the personal saving rate has been running at barely over half of its long-term average. Unfortunately, this is nothing new. The personal saving rate has been below its long-term average for 10 of the past 11 years.

Government stimulus may be hard to deliver

When the economy starts to slip into a recession, you could normally count on the federal government to take steps to stimulate the economy. However, the government’s actions may have a limited effect under current conditions.

The Fed is expected to start cutting interest rates soon. However, when debt levels are already at record highs, cutting rates might not encourage much more borrowing. Lenders are already getting concerned enough to tighten credit standards. In any case, it’s unclear whether more borrowing would be good.

The Federal government could ramp up spending to spur the economy. However, with the federal budget deficit already at an extreme high, it’s not clear how much more borrowing bond holders would tolerate.

Investors finance the deficit by buying US Treasury bonds. When they get concerned about the size of the deficit, they tend to sell bonds. This drives interest rates up, dragging the economy and making it more expensive for the government to borrow.

Finally, no matter who wins the upcoming election, there’s a strong possibility that dysfunction in Washington will make it difficult for the federal government to take decisive action.

Brace yourself for the economic slowdown

Americans don’t seem to realize how good the economy has been in recent years. This may leave them unprepared for the possibility of a downturn. Two things can help them prepare:

• Tighten belts and reduce spending. Paying down debt and building savings now means you go into a recession in a stronger position.
• Take care of your credit. Build up your credit score. With credit already becoming harder to get, a strong credit score may help retain access to credit on good terms.

Economically, the party may not be quite over yet, but it seems to be winding down. Unless consumers take action now, the looming economic hangover could be painful and prolonged.

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It’s been a strong year for stocks, with the US market up about 18% so far in 2024. Still, it only takes a few bad days to set Wall Street panicking.

A disappointing employment report on the morning of August 2, 2024, triggered a 2-day sell-off in US stocks. Some global markets were hit even harder. Investors interpreted slow employment growth as a sign of an impending recession. Given the importance of US consumers to the global economy, the ripple effects resonated worldwide.

When something goes wrong, people naturally start to point fingers. In this case, the Federal Reserve was an obvious scapegoat, especially after the Fed has continued to frustrate investors by delaying its highly anticipated interest rate cuts.

As share prices plunged, the oft-repeated logic blamed high interest rates for creating a drag on the economy that now threatened to plunge it into a recession. The only solution was for the Fed to do something fast.

Some want the Fed to hit the panic button

To understand the link between a couple of bad days for the stock market and the Fed, it helps to think of it as a chain reaction. This way, you can trace that chain backward from the market decline to the Fed’s interest rate policy:

1. The stock market reacted badly to a disappointing employment report
2. A weak jobs market can be a sign of a worsening economy
3. High interest rates discourage spending and investment and so act as a drag on the economy
4. The Fed signaled late last year that it intended the equivalent of three 0.25% rate cuts this year, but it has since downsized those expectations to a single 0.25% rate cut and has not yet done anything.

The simple interpretation is that it’s all the Fed’s fault, and the Fed needs to rectify the situation with a rate cut. According to this mindset, cutting rates at the next Fed meeting in September 2024 wouldn’t be good enough. In the midst of the market turmoil, there were suggestions that the Fed should call an emergency meeting to cut rates immediately. In short, nervous investors want the Fed to hit the panic button.

There’s more to the Fed’s policy than a single employment report

The cause of the weak employment report–and the solution–are a little more complicated than panicked investors would like to believe.

First, it’s important to remember why the Fed raised interest rates in the first place. It did so to head off soaring inflation, which peaked at 9% in mid-2022. Since then, higher interest rates have largely succeeded in calming inflation. The latest year-over-year increase in the Consumer Price Index was just 3.0%.

However, fighting inflation is a bit like fighting a forest fire. Even when the flames seem to be extinguished, there can be hot spots that can flare up again. So, the Fed has been looking for sustained evidence that inflation is receding. Given the damage that high inflation can cause and the complexity of bringing it under control, the Fed is not going to reverse two-plus years of inflation-fighting monetary policy just because of a couple of bad days on Wall Street.

In addition, it’s important to recognize that the August 2 employment report wasn’t all that bad. The latest figure of 114,000 new jobs created in July was well below the monthly average of 215,000 for the prior 12 months but still represented a growing job market. That marked the 43rd straight month of employment growth.

Besides sustained job growth, the economy as a whole grew at a 2.8% annual rate in the second quarter, after adjustment for inflation. That was double the first quarter’s growth rate and marked two full years of uninterrupted growth. Clearly, the Fed’s rate policy hasn’t killed the economic expansion.

A rate cut would have a limited impact on the economy

None of the above should suggest that the economy doesn’t have problems. However, it’s doubtful that an emergency rate cut would solve those problems.

Supposedly, high interest rates have discouraged spending. However, credit card debt has been growing at an alarming rate. Credit Sesame’s analysis of data from the Federal Reserve Bank of New York’s Household Debt and Credit Report found that the amount of credit card debt outstanding has risen by 45% over the past three years. Despite higher interest rates, consumers are not deterred from borrowing.

Now, consider the potential impact of a rate cut. The Fed is expected to cut rates by 0.25% between now and the end of the year. The average interest rate charged on credit cards is currently 22.76%, so a 0.25% reduction isn’t going to do much to reduce the burden of payments on credit card debt.

A rate cut isn’t a cure-all for the economy. It could be argued that encouraging more borrowing is the last thing the economy needs at this point. A too-hasty rate cut could increase the risk of inflation flaring up again, which would be especially counterproductive.

Investors who are concerned about risk can adjust their portfolios instead of waiting for the Fed to solve the problem with a magical rate cut.

Similarly, individuals burdened by credit card debt could cut spending to reduce their borrowing rather than hoping for a rate cut. Working on your credit score to help secure a lower interest rate is also a good idea.

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Manufactured goods orders fall

The Census Bureau reported that new orders for manufactured goods fell by 3.3% in June 2024. This was the second consecutive monthly decline, following four consecutive monthly increases. Weakening demand for transportation equipment was the main reason for the decrease, as new orders for transportation equipment were down by 20.6% in June. See details at Census.gov.

Recession fears trigger panic in world markets

A relatively weak US employment report last week seems to have triggered panic in global stock markets. The Nasdaq and S&P 500 indexes started the week with 3% declines. Japan’s Nikkei stock index lost 12.4% on Monday, its worst day since 1987’s Black Monday. Concern over economic weakness started a chorus of pleas for the Federal Reserve to cut interest rates. However, given high debt levels and rising delinquency rates, it’s not clear that facilitating more borrowing would cure the economy’s ills. See article at Reuters.com.

Recession fears trigger drop in mortgage rates

Negative news on the economy may have been bad for stock market investors, but it provided a welcome drop in mortgage rates for would-be home buyers. 30-year mortgage rates fell by 0.26% last week to 6.47%. Mortgage rates are the lowest in over a year. 30-year rates are now 0.14% lower than they were at the start of 2024. 15-year rates experienced an even larger one-week plunge, falling by 0.36% to 5.63%. That’s 0.30% lower than the start of the year. See rate details at Freddie Mac.com.

Consumer debt continues to grow

The total amount of consumer debt outstanding reached another all-time high in the second quarter of 2024. The total consumer debt balance owed is now $17.80 trillion. That’s a $109 billion increase from the previous quarter. Credit card debt had the fastest percentage growth rate during the quarter, rising by 2.4% to reach $1.142 trillion. Credit cards also had the fastest flow of debt into serious delinquency. 7.18% of credit card debt became 90 days or more overdue during the second quarter of 2024. See Household Debt and Credit Report at NewYorkFed.org.

Morgan Stanley breaks taboo Bitcoin ETFs

Morgan Stanley has become the first major bank to permit its sales force to sell Bitcoin-backed exchange-traded funds to its customers. Major banks have shied away from these products because of difficulties squaring a no-dividend, speculative product with client suitability requirements. However, Morgan Stanley will allow its 15,000-strong sales force to include Bitcoin ETFs alongside the more conventional securities it can sell to customers. See article at Yahoo.com.

FDIC looks into uninsured deposits

The FDIC has requested more information from its member banks about uninsured deposits. These are accounts that exceed the individual deposit insurance limit of $250,000. These deposits are not normally protected from bank failures by the FDIC insurance fund, though the FDIC made exceptions during last year’s bank failures. As these failures demonstrated, uninsured deposits not only represent a risk to the depositors but can also threaten the stability of the banks that hold them. There are an estimated $7.7 trillion dollars in uninsured deposits held by US banks, representing 43% of domestic deposits. See article at PYMNTS.com.

Habitual bettors more likely to exhibit financial distress

A new TransUnion survey found that people who bet in excess of $500 a month show more signs of financial distress than non-bettors. Nearly twice as many heavy online bettors expect to be unable to pay a bill or loan in full. They are more than twice as likely to have 90+ days overdue payments during the past year. Bettors are more than three times as likely as non-bettors to have been contacted by a collection agency within the past year and 14 times as likely to have been ordered by a court to make a child support payment within the past month. See article at TransUnion.com.

Weekly news headlines from Credit Sesame

• Last week’s news roundup August 3, 2024
• Next week’s news roundup August 17, 2024

The post News roundup August 10, 2024 appeared first on Credit Sesame.

A soft landing is often discussed as the ideal solution to the economy’s problems. It has the potential to cool inflation without plunging the economy into a serious recession. However, it is a tough trick to pull off.

For much of the past year, the economic soft landing has played a game of now-you-see-it-now-you-don’t. When the economy first recovered from the pandemic, growth was so fast that it sparked inflation. Then, when inflation was cooling, economic growth seemed to slow too quickly.

For a brief period during the fourth quarter of last year, economic growth and low inflation seemed to be on track for a soft landing. It wasn’t long before things veered off course as inflation heated up in early 2024.

In the last week of April 2024, there were new signs of hope for the soft landing scenario. However, if it happens, there are also risks.

The US economy has lost momentum

Oddly, the good news is that the economy has lost much of its momentum. In late April 2024, the Bureau of Economic Analysis announced that GDP grew at an inflation-adjusted annual pace of 1.6% in the first quarter of 2024. That’s significantly slower than the pace of growth in the second half of 2023.

The Conference Board’s Leading Economic Index (LEI), which indicates the economy’s future direction, also shows signs of slowing. The LEI declined in March 2024 after rising slightly in February.

Given that economic growth has been largely fueled by consumer spending, this slower pace is no surprise. Personal savings rates are low, and credit card late payment rates have increased over the past year. In short, the primary source of economic growth is showing signs of being tapped out.

It may seem strange to celebrate slower economic growth. However, in the context of persistent inflation, slower growth could have benefits. At the same time, it’s also important to recognize that slower growth poses some risks.

The potential benefits of slower economic growth

The primary benefit of slower growth in this situation is that it could cool down inflation. After nearly disappearing in the fourth quarter of 2023, inflation has bounced back in the first three months of this year.

Given inflation’s tendency to feed on itself, that’s cause for concern. Slower growth would take the edge off demand and force retailers to offer better deals to price-conscious consumers.

As consumers rein in spending, they would have an opportunity to pay down debt. With consumer debt higher than ever and late payments rising, paying off some of those debts would take some of the risks out of the economy.

A slowdown might also calm some of the speculation in the financial markets at a time when investor enthusiasm seems to have gotten far ahead of reality. Over the past 18 months, the S&P 500 has risen by 46.5%, while earnings on the underlying stocks have increased by just 3.29%.

One example of speculative thinking and the risks it creates is the recent hit that Meta, the parent company of Facebook, took in the stock market. Much of the stock speculation centers around the potential of Artificial Intelligence (AI). Tech stocks like Meta have been the primary beneficiaries of enthusiasm for AI. However, when Meta CEO Mark Zuckerberg recently announced that the company was going to boost its spending on AI, the stock plunged by 10% in one day. It seems investors were counting on reaping the benefits of AI without the actual cost of developing new products based on it.

This kind of unrealistic thinking creates risk in the financial markets. A slower-growth environment might take some wind out of an overblown market.

Potential risks of slower growth

A slower growth environment would also carry some risks. Growth could slow too much, causing a downward spiral. For example, if the economy slows so much it shrinks, it could enter a recession. That would almost certainly cause unemployment to rise. As consumers lose income, growth would slow even more, possibly worsening the recession and unemployment.

Given the precarious state of consumer credit, that could accelerate debt defaults, putting the financial system at risk. A recent assessment of economic risks by the Federal Reserve identified default on both consumer and commercial debt as a concern. Rising interest rates have already made it more difficult to service much of this debt.

The kicker is that even a downturn this severe might not accomplish the goal of calming inflation. Even with a fall-off in demand, military conflicts and rising tariffs could create shortages of key goods. Over the past year, the housing market has been a perfect example of how supply shortages can cause prices to rise even in the face of weak demand.

Given all this, the Fed standing pat at the conclusion of its meeting on May 1, 2024, should be no surprise. The Fed has concerns about economic growth and inflation, and with so much uncertainty on both fronts, the best policy now may be to wait and see how things develop.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

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1. Credit cards lead to rise in delinquencies
2. Credit cards from large banks are more expensive than those from smaller issuers
3. German central bank says their country is probably in a recession
4. US companies show cost-cutting trend
5. Capital One announces Discover acquisition
6. 2023 saw the most work stoppages in more than 20 years
7. Mortgage rates continue to leap higher in reaction to inflation
8. Home sales finally perk up

Credit cards lead to rise in delinquencies

Late payments continued to rise for most forms of consumer credit in January 2024, led by credit card accounts. Delinquency rates rose for credit cards, auto loans, and mortgages, though they declined slightly for personal loans. The percentage of credit card accounts that are 30 days or more overdue has now increased for eight months in a row. One positive sign is that average credit card balances declined slightly last month, though this may explain why retail sales fell sharply in January. There is an extreme split in delinquency problems between prime and subprime credit card accounts. Serious delinquency (90 days or more overdue) rates for prime customers remain near zero, while those for subprime customers are now 21.22%. See report at TransUnion.com.

Credit cards from large banks are more expensive than those from smaller issuers

The Consumer Financial Protection Bureau (CFPB) found a significant difference in credit card interest rates and fees based on the issuer’s size. The CFPB found that the 25 largest credit card issuers charge rates that are 8 to 10 basis points higher than small or medium-sized institutions. 9 of these 25 large issuers have at least one product with a 30% or higher credit card rate. The CFPB estimates that these rate differences could cost customers of larger credit card companies an extra $400 to $500 a year in interest charges. Larger issuers are also more likely to charge annual fees. 27% of credit cards from large firms have an annual fee, compared with just 9.5% of those from small issuers. The average annual fee from large issuers is $157, compared with $94 for credit cards from small issuers. See details at ConsumerFinance.gov.

German central bank says their country is probably in a recession

The Bundesbank, which performs functions in Germany similar to those of the Federal Reserve in the United States, reported that Germany appears to have entered an economic recession. The central bank reported that Germany’s growth has been flat to negative for four consecutive quarters. It said consumers have been cautious about spending, while higher interest rates have made businesses reluctant to invest. Germany is Europe’s largest economy. On the heels of last week’s news that the United Kingdom and Japan are also in recessions, a picture of weak global demand in 2024 is emerging. See article at Reuters.com.

US companies show cost-cutting trend

Several major US employers have recently announced layoffs and other cost-cutting measures. Nike, Mattel, and JetBlue are among the corporate giants cutting jobs. Macy’s is closing some store locations, United is eliminating some in-flight meals and auto makers are reducing investments in electric vehicles. The trend is reportedly due to inflation fatigue among consumers. With Americans no longer willing or able to pay fast-rising prices, companies are looking to rein in those prices by cutting costs. See article at CNBC.com.

Capital One announces Discover acquisition

Capital One plans to buy Discover Financial Services in a deal worth $35 billion. Discover shareholders will receive Capital One stock in exchange for their current stock. Capital One and Discover are two of the largest non-bank credit card issuers. Analysts say the acquisition may give Capital One more power to compete with dominant payment giants MasterCard and Visa. However, the deal still requires regulatory approval, which may be contentious. See article at ABCNews.com.

2023 saw the most work stoppages in more than 20 years

The Bureau of Labor Statistics reported that more labor disputes led to major work stoppages last year than in any year since 2000. There were 33 major work stoppages in 2023, roughly twice the average of 16.7 over the past 20 years. Work stoppages are typically signs that workers feel they have the bargaining power to risk a strike. Tellingly, 86.7% of last year’s work stoppages were in the service sector, which indicates the general labor shortage for service jobs. A higher number of work stoppages may be good news for worker wages, though it also creates more inflation pressure. See news release at BLS.gov.

Mortgage rates continue to leap higher in reaction to inflation

For the second consecutive week, 30-year mortgage rates jumped by 0.13%. That puts rates at 6.9%, the closest they’ve been to 7% since mid-December. 15-year mortgage rates were up even more sharply, rising by 0.17% this week and by 0.39% over the past two weeks. 15-year rates are now at 6.29%. The sudden rise in mortgage rates is in reaction to last week’s Consumer Price Index and Producer Price Index reports, which show inflation is proving more persistent than previously thought. See mortgage data at FreddieMac.com.

Home sales finally perk up

According to the National Association of Realtors, existing home sales rose by 3.1% in January. This bucks a longer-term trend that has seen home sale volume decline. It remains to be seen whether the revival of sales can survive the steep increase in mortgage rates since the end of January. See press release at NAR.Realtor.

Weekly news headlines from Credit Sesame

• Last week’s news roundup February 17, 2024
• Next week’s news roundup March 2, 2024

The post News roundup February 24, 2024 appeared first on Credit Sesame.

The financial benefits of having a good credit score are well-established and include:

• Easier access to credit.
• Better credit card offers.
• Lower interest rates.

Since employers and landlords often check the credit reports of applicants these days, your credit score can even affect where you work and where you live.

These are all tangible financial benefits. But here’s something you can’t put a price on: good credit may give you more peace of mind.

A Credit Sesame survey found a link between credit scores and how people feel about their finances. Survey respondents with good to exceptional credit scores were generally less worried about a recession, more optimistic about the economy and better able to sleep at night.

How worried are Americans about their finances?

The Credit Sesame survey asked over 1,500 adults three questions about how they felt about the economy and their own finances:

1. Are you worried about a recession?
2. How do you feel about your financial situation?
3. How often are you kept awake worrying about money?

The results showed a fair amount of concern among consumers, regardless of credit score, about the economy and their financial outlook.

• 65% are worried about a recession.
• 61% describe their financial situation as middle of the road
• 16% are pessimistic about their financial situation (vs 23.49% optimistic)
• 47% are kept awake at night at least some of the time

Overall, these figures describe a population that is cautious but not overly fearful about the financial future. However, the responses took on a different character when segmented by credit score.

Is credit score key to how people feel?

Segmenting responses by high credit scorers (670 and higher, good to exceptional credit) and lower credit scorers (669 and under, fair to poor credit) yielded a different picture.

Recession fears are widespread, and even people with good credit scores are not immune. However, they are less worried about a recession than people with lower credit scores.

From a mental health point of view, perhaps the most important indicator is how they feel about their finances when their head hits the pillow at night. Being kept awake by money worries may affect the way people function socially and professionally.

In 2023, consumers generally are concerned about the economy. The Credit Sesame survey results indicate that concern is more prevalent among people with lower credit scores.

Does a high credit score correlate with peace of mind?

Financial knowledge and personal finance management skills often go along with a high credit score. People with a higher credit score have behaved responsibly with credit and debt in the past.

But in and of itself, a high credit score does not give peace of mind. Many other factors affect how individuals feel about their finances. For example,

• Income
• Expenses
• Debit
• Savings and investments
• Job security
• Health care costs
• Family and dependents

Consumers who understand and control all these factors as part of good financial management are more likely to have a higher credit score. In other words, having a high credit score does not guarantee peace of mind. However, having responsible habits that lead to a good credit score is likely to give you more confidence around your personal finances.

Credit improvement is a gradual process involving the development of good financial habits and does not happen overnight. But a commitment to raising your score, perhaps using a credit builder tool and by following good advice can make a difference faster than you may imagine. Your new and improved credit score could indeed come with more peace of mind around your personal finances.

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Survey methodology

The Credit Sesame Credit Health and Financial Fitness Survey December 2022 was designed and executed by Credit Sesame using the WebEngage survey tool. The survey sample comprised over 1,500 Credit Sesame members with a credit score distribution resembling the U.S. general population. In aggregate the sample data is accurate with a 2.5% margin of error using a 95% confidence level.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Is a good credit score key to peace of mind? appeared first on Credit Sesame.

1. Overdraft fee charges rise for the first time since 2021
2. Rising Treasury bond yields dampen asset prices
3. Panama Canal traffic snarl threatens supply chain
4. Small businesses continue to believe the U.S. is in a recession
5. Regulator sues short-term lender for churning loans
6. Home purchase mortgage applications lowest since 1995
7. Existing home sales fell in July 2023
8. Mortgage rates continue to rise

1. Overdraft fee charges rise for the first time since 2021

The total dollar amount of overdraft fees charged rose in the second quarter of 2023. It was the first such rise since the final quarter of 2021. Overdraft fee charges have generally fallen in recent years, mainly due to regulatory pressure to reduce or eliminate such charges. Despite the general decline in overdraft charges, they still add up to a large amount. In the second quarter of 2023, overdraft fee charges industry-wide totaled $1.43 billion. Besides the direct cost of overdraft fees, consumers should be aware of other negative consequences of overdrafting their bank accounts. These include possible late payments and forced closure of an account. See article at SPGlobal.com.

2. Rising Treasury bond yields dampen asset prices

The yield on 10-year U.S. Treasury bonds rose to a 15-year high of 4.366 this week. Rising bond yields reflect falling bond prices, but they also tend to have a negative impact on other assets. The higher bond yields go, the more they draw money away from riskier assets like stocks. Bond yields are reacting to concerns about the lingering threat of inflation. While the inflation rate has dropped sharply over the past year, a persistently strong economy and rising energy prices have raised concerns that it may flare up again. Also, downgrades of the U.S. government’s credit rating may have damaged the appeal of Treasury securities, causing yields to rise. See article at Reuters.com.

3. Panama Canal traffic snarl threatens supply chain

Just as global supply chains returned to normal after COVID, weather conditions are creating severe delays for the crucial Panama Canal shipping corridor. Due to drought conditions, traffic through the canal has been delayed by as much as three weeks. Those conditions lower the level of the water in the canal. This means ships have to carry less cargo to pass through. Concerns are that these extreme conditions may become more common due to global climate change. The resulting shipping bottleneck could cause shortages and inflation pressures. See article at Reuters.com.

4. Small business owners continue to believe the U.S. is in a recession

A slight majority of small business owners say they believe the country is in a recession. This is according to a survey by the National Federation of Independent Business. A similar survey in April also found that most small business owners thought a recession had already started. These business owners seem to base their assessment on a general impression of the economy rather than what they see firsthand. More than two-thirds of survey respondents reported that the state of their own business was either “excellent” or “good.” 80% said their local economy was at least “okay.” See article at Yahoo.com.

5. Regulator sues short-term lender for churning loans

The Consumer Financial Protection Bureau (CFPB) has sued Heights Finance Holding Company, formerly Southern Management Corporation, for predatory lending practices. The CFPB alleges that Southern and its affiliates used deceptive techniques to lock customers into short-term, high-cost loans. They approved loans they knew the customers could not pay off and repeatedly induced them to refinance. Even though the company’s loan terms are usually just a few months, they managed to lure 10,000 customers into a continuous cycle of renewed loans. The company operates in 250 locations across six states. See announcement at ConsumerFinance.gov.

6. Home purchase mortgage applications lowest since 1995

According to the Mortgage Bankers Association, last week, the number of applications for home purchase mortgages dropped to its lowest level since April 1995. The slowdown in home-buying activity came amid a spike in Treasury bond rates that pushed mortgage rates above 7%. Adjusted for seasonal differences, applications for home purchase mortgages were down by 5% from the previous week and 30% lower than a year earlier. See news release at MBA.org.

7. Existing home sales fell in July 2023

Completed sales of existing homes slipped by 2.2% in July and are off by 16.6% from a year ago. Sales grew in the West but declined in the other three major regions of the U.S. market. Over the past year, the supply of unsold inventory relative to the sales pace has increased even though fewer houses are available for sale. There are now 14.6% fewer houses on the market than a year ago. And yet, this represents 3.3 months of supply at the current sales pace, up from 3.2 months in July of 2022. See news release at NAR.realtor.

8. Mortgage rates continue to rise

30-year mortgage rates rose for a fifth straight week to reach 7.23%. That’s their highest since the beginning of June 2001. 15-year mortgage rates have also increased for five weeks in a row. Continuing strength in the economy and lingering concerns about inflation were cited as reasons for the recent climb in mortgage rates. See rate details at FreddieMac.com.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup August 19, 2023
• Next week’s news roundup September 2, 2023

The post News roundup August 26, 2023 appeared first on Credit Sesame.

The Bureau of Economic Analysis reported that the U.S. economy grew during the first quarter of 2023, even after adjusting for inflation. However, the news was not all good. The report of continued economic growth was soured by the reality that the pace of growth slowed considerably in the first three months of 2023. Also, there are obstacles ahead that could easily trip up a weak economy.

So, while the economy in 2023 is still kicking it seems to be in critical condition. The months ahead will be touch-and-go in terms of whether the current economic expansion survives.

1st quarter slowdown, but not recession

The Bureau of Economic Analysis reported that U.S. Gross Domestic Product (GDP) grew at a real annual rate of 1.1% in the first quarter. That’s a significant slowdown from the 2.6% pace of real GDP growth in the last quarter of 2022.

GDP is a comprehensive measure of economic activity. When economists talk about “real” growth, they mean growth adjusted for inflation. So, even though inflation remains a challenge, the economy managed to grow at a faster pace than price increases.

The other detail of how GDP is reported is less encouraging. The 1.1% growth figure is an annual rate based on the assumption that the economy would grow at the same pace for a full year. That means that there was only about 0.27% of actual growth during the first quarter of 2023.

Considering that this is just a preliminary estimate, such a low number means that subsequent revisions to the official GDP could be significant. It may turn out that growth was a little better than initially thought, but it also may be the case that growth was actually closer to 0%.

At this point, it’s useful to make the distinction between an economic slowdown and a recession:

• A slowdown means that the economy is still growing, but the pace of growth has gotten weaker.
• A recession means the economy is actually shrinking. This would involve a significant period of negative GDP growth. 

For example, when GDP growth goes from 2.6% to 1.1% it’s a slowdown. If GDP growth went from 2.6% to negative 1.1%, it could signal the start of a recession. Even then, recessions are not officially declared until the economy has either shrunk by a large amount or has been shrinking for an extended period. 

Is the economy in 2023 on borrowed time?

Anemic though it was, the 1.1% rate of real GDP growth in the first quarter meant that the economy was not yet in a recession. However, besides the fact that the growth rate is slowing, there are other reasons to be concerned that the economic expansion is living on borrowed time. Increasingly, economic growth has been fueled by consumer borrowing. The current level of borrowing may be unsustainable: 

• Total consumer debt grew by 8.5% last year, to reach a record total of $16.9 trillion.
• The cost of that debt rose significantly last year due to rising interest rates, and this continued in early 2023.
• Lenders are already showing concern about a possible recession by tightening lending standards. This means it’s getting tougher to qualify for credit.

Even without consumers starting to pay down that debt, just a slowing of the pace of borrowing would take a lot of wind out of the economy’s sails.

Banking woes remain a wild card

There’s another shadow over that soft first-quarter GDP number: it doesn’t reflect the full impact of recent bank failures and the ongoing concern that more of the same may be ahead. At the heart of the issue is the flight of deposits from some banks. As their deposits dwindle, banks have less capital available for making loans. 

The anticipation of continued deposit losses and/or a recession may make banks especially cautious about committing precious resources to new loans. The result may make it tougher for all but the most qualified consumers to get credit in the months ahead. This adds to the potential drag on lending, and thus on spending. 

Inflation remains a factor

While inflation has eased in recent months, it is still unacceptably high. As of the end of the first quarter, the Consumer Price Index was up 5.0% over the previous twelve months. The Personal Consumption Expenditures Price Index was up 4.2%. Both numbers are well above the Federal Reserve’s target of 2.0%.

Inflation is a hurdle that spending has to clear in order for the economy to show real growth. The higher the hurdle, the harder it is to achieve growth that exceeds the inflation rate.

Think of it this way. If inflation is 5%, you have to spend 5% more just to keep pace. In order to actually buy a greater amount goods and services, you’d have to spend an even higher amount. 

On the other hand, if inflation were 2%, spending 5% more would mean you could actually buy 3% more goods and services. That would mean you – and the economy – were getting ahead.

Until inflation eases closer to the 2% level, it will remain hard for the economy to come out ahead. It also will be less likely that the Fed will lower interest rates, so borrowing costs are likely to remain a drag on potential growth.

The cycle of economic life

Recessions cause hardships, but they are part of the cycle of economic life, and as with cycles of life in nature, there is a renewal that follows periods of decline.

In the case of this particular cycle, you might say that it’s overdue for a recession. Since World War II, the average economic expansion has lasted just shy of 6 ½  years. Except for the short, sharp recession caused by the onset of COVID, the current cycle has gone nearly 14 years since the previous downturn.

During recessions, people tend to spend less. They pay down debt and rebuild savings. Those are both things that could benefit American consumers in the long run. 

Recessions also help snuff out high inflation, which is something else that would benefit the current economy. 

Despite continued growth in the first quarter, there are reasons to believe the economy may be headed for a recession. While that’s unfortunate, it’s important to remember that it may also be the path the economy has to take toward a new beginning.

If you enjoyed What’s happening with the U.S. economy in 2023? you may like,

• How the poor vs. rich were affected by the economy in 2022
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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post What’s happening with the U.S. economy in 2023? appeared first on Credit Sesame.

1. Job growth slows
2. Supreme Court disallows student loan forgiveness
3. Mastercard launches subscription management service
4. Oil prices continue to slump
5. Key inflation indicator muted in May
6. Stress test shows bank resiliency
7. Manufacturing weakness continues
8. Yield curve signals likely recession
9. Mortgage rates hit 2023 high

1. Job growth slows

The US economy added 209,000 jobs in June. That marked a slower pace of employment growth than May’s 306,000. Along with weaker job growth, there were other signs of a weakening job market. Initial job growth estimates for April and May were revised downward by 110,000. Also, the number of people working part-time rather than full-time for economic reasons increased by 452,000. That marks a 12% increase in just one month of people who would prefer to work full-time but had to settle for part-time employment. See report at BLS.gov.

2. Supreme Court disallows student loan forgiveness

Following a Supreme Court ruling that canceled their student loan forgiveness plan, the Biden Administration seeks an alternative. The President is now proposing a plan that involves a grace period of 12 months once loan payments resume in October. It also would drastically modify current income-driven repayment programs. The new proposal would eliminate payments for anyone making less than 225% of the federal poverty level. It would limit payments to 5% of discretionary income. Finally, for loans of $12,000 or less, it would eliminate remaining loan balances after ten years. This proposal seems likely to lead to a new round of court challenges. See article at Yahoo.com.

3. Mastercard launches subscription management service

Amid criticisms that streaming and other subscription services have become overly expensive and hard to handle, Mastercard has teamed with Subaio to offer a new subscription management service. This service allows consumers to manage their subscription services through a single source rather than dealing with each provider separately. Subscription management has become a hot new area in fintech. Mastercard’s research found that the average consumer has 12 different media and entertainment subscriptions, with millennials juggling an average of 17 such subscriptions. See release at Mastercard.com.

4. Oil prices continue to slump

Brent oil prices, which act as a global benchmark for oil, declined for the fourth consecutive quarter in the second quarter of 2023. Prices have remained weak despite efforts by oil producers to limit supply. Falling energy prices have been a moderating influence on inflation over the past year. See article at Yahoo.com.

5. Key inflation indicator muted in May

The Personal Consumption Expenditure (PCE) price index rose by just 0.1% in May 2023. The PCE price index is the primary inflation indicator used by the Federal Reserve. The 0.1% increase represents slowing inflation after the PCE price index rose by 0.4% in April. May’s increase brings the inflation rate for the past year to 3.8%. However, core inflation remains more elevated at 4.6%. See details at BEA.gov.

6. Stress test shows bank resiliency

Key US banks passed a Federal Reserve stress test with flying colors. Twenty-three major banks, including industry leaders JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley, participated in the test. The test measured whether the banks’ financials could continue to meet the Fed’s reserve requirements in the event of a severe global recession. The test measured how the banks would react when unemployment reached 10% and the stock market lost 45%. See details at Yahoo.com.

7. Manufacturing weakness continues

A widely-followed measure of US manufacturing activity fell for an eighth straight month in June. The Institute for Supply Management (ISM) manufacturing index fell to 46, down from 46.9 in May. Any reading below 50 indicates declining manufacturing activity. The index has been below 50 for the longest time since the 2008-2009 recession. The current reading is the lowest since May 2020. See article at Yahoo.com.

8. Yield curve signals likely recession

The spread between 2-year and 10-year Treasuries is now the most inverted in 42 years. An inverted yield curve is when short-term yields exceed long-term yields. The spread recently reached 109.5 basis points. High short-term yields are partly due to the Fed’s string of rate increases. While lower long-term yields could be taken as a sign that the Fed’s inflation-fighting efforts will succeed, they also suggest that a recession might be necessary to smother inflation thoroughly. See article at Reuters.com.

9. Mortgage rates hit 2023 high

30-year mortgage rates rose for a second week to reach 6.81%. That marks their highest in 2023, though it’s still short of last year’s peak of 7.08%. 15-year rates also reached their highest point in 2023, reaching 6.24%. See details at FreddieMac.com.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup June 24, 2023
• Next week’s news roundup July 15, 2023

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