Ready for Rough Times

Mike Zaccardi

AS INFLATION continues to run hot, wage gains for the bottom quartile of income earners are almost keeping pace with consumer prices. Meanwhile, checking account balances for this group remain more than 50% above pre-pandemic levels.

Is everything A-okay? Of course not. Still, I’d argue that many Americans have positioned themselves well to weather an economic downturn. Another sign: Average credit scores are much improved from, say, the mid-2000s, when families were loading up on debt and speculators were snatching up houses only to flip them months later.

According to Bank of America’s third-quarter earnings report released last week, the average FICO score among the firm’s credit card customers was a solid 770. That’s a smidgen higher than was reported in the same quarter a year ago.

Another bright spot for everyday Americans: Natural gas prices have plummeted. After surging to almost $10 per MMBtu during the summer, the spot price for U.S. Henry Hub natural gas is back under $5. That’s the lowest level since March. Families might not face home heating bills this winter that are as steep as some forecasters had feared earlier this year. Meanwhile, utility bills across the pond should also be less severe now that European natural gas prices are down 67% from their 2022 peak.

But there is, of course, also bad news. Mortgage rates have surged to their highest level in nearly 22 years, with new 30-year loans now above 7%. It’s hard to fathom how the housing market avoids a collapse in monthly transactions. Between steep lending rates and still sky-high real estate prices, prospective borrowers face huge costs, while homeowners who secured a low mortgage rate will likely sit tight for as long as possible.

These are strange times for consumers. But with strong household balance sheets and the job market continuing to hum along, most families should come through these tough times in decent shape.

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