The U.S. economy is unhealthy. The U.S. Bureau of Labor Statistics reports inflation. The Consumer Price Index (CPI) from 2014 to 2020 averaged 1.6%. However, the CPI from 2020-2024 averages 4.1%. Prices are higher. Goods cost more. A gallon of milk in 2018 cost two dollars and ninety cents. In 2022, the price of milk increased to four dollars and ten cents. This difference is an increase of 29%. The price of eggs is higher. One dozen eggs in 2018 cost one dollar and seventy-four cents. In 2022 the cost increased to two dollars and eighty-six cents. This difference is an increase of 39%. The price of a pair of Levi 501 jeans has increased by twenty dollars. Like milk, the increase is 29%.
For the past four years, the consumer has been impacted by around 30% increase to goods. The rate of savings for the household is diminished. Prior to inflation, if a household budgets four hundred dollars a month for food, now they are getting only two hundred eighty dollars' worth of food. The household absorbs the cost and is forced to accumulate savings at a slower rate.
Interest rates are high. In 2019, U.S. Federal Reserve interest rate was1.95%. In 2024, the rate is 4%. The rate doubled. Mortgages, car loans, and credit cards are affected. A twenty-year mortgage in 2019 was 3.94%. In 2024, the rate increased to 7.425%, almost double. The real estate market will reflect this increase. Buying a home now is less likely than before. Drivers will opt to wait on a new car. Moreover, credit card APRs at all-time highs will discourage excessive spending.
Therefore, if spending is less, then supply is reduced based upon a lower demand. At this time, economic contraction is numerically tangible to all consumers. People who have income are fully aware of inflation and its direct effect on the wallet. People are not able to live the way they did prior to inflation. Since, prices are higher, incomes must adjust or quality of life index will decline over time because consumers will wisely choose cheaper alternatives in the stores.
The Dow Jones Industrial Average (DJIA) is booming. The DJIA has tipped the forty thousand mark, increasing while households are feeling the pinch of an economy in recession. However, the DJIA does not reflect the true economic reality of the consumer. The DJIA is seemingly disconnected from the actual downturn that all household are experiencing. In March 2020, following the news of Covid-19, the DJIA averaged 19,173.98. Within two years, five trillion dollars in government spending was pumped into the economy, and after four years the DJIA doubled to 40,589.34. Previously, in 2010, the DJIA averaged 10,668.59, and doubled in ten years. If the DJIA doubled in ten years, then doubled again in only four years, then the rate of change is accelerating.
The DJIA is an economic indicator that determines the health of the economy based on stock purchase. If the overall stock market increases, then the economy has reduced risk to spending, and investments will turn a profit. When a company's market capitalization increases, the company will have more money to spend. The trend of the CPI and the DJIA are indicators which do not add up. Caution can only be warranted. Inflation tightens the belt and should reduce stock market activity. An unknown outcome has been created, which at this time appears irregular. The direction of the stock market must reverse at some point to make sense of everyday finance. Hence, the U.S. economy is unpredictable, and investment is deemed risky.
In 2024, the U.S. National Debt is $35.12T. In 2019, the debt was $22.72T. In 2034, the debt is projected to be $54.386T. The National Debt is increasing by over two trillion a year. In addition, the Congressional Budget Office (CBO) reports a -3% average change to U.S. Gross Domestic Product (GDP) from 1970-2019. The change to GDP is now -4.8% which is projected to 2030. The GDP is less, and therefore the economy is not producing the needed revenues to repay the interest on money borrowed. The rate of debt is capitalizing at irrepressible speed, and the national balance sheet is in the red with no relief in sight. The outlook for the U.S. economy is a long recession.
