Why No Recession Yet? Thank the US Consumer

The US economy is being kept afloat with lawnmowers, cars and vacations. US consumers have kept buying these things despite high inflation and the contractionary policy of the Federal Reserve, and they deserve thanks not only for the recession that still has not come but for the fast pace of recent economic growth.

And yet, the economy doesn’t feel sustainable. Consumers have to cut back eventually, right? And when they do, does that mean a recession?

Part of the answer can be found in Americans’ bank accounts. A few years ago, they were flush with pandemic checks, but their owners had nowhere to spend their money. Now question of how much savings Americans have is as contested as the race for speaker of the House (and it has lasted much longer). There are conflicting reports about whether the excess savings have run out, even though spending is still strong. No one is sure what is going on.

A more detailed answer to these questions comes from the Fed, which released its tri-annual Survey of Consumer Finances last week. The short version: Things have been worse. While many consumers are wealthier, many others are spending on borrowed time. Some people still have lots of cash, and others are in a precarious spot.

The survey offers the most complete picture so far of what happened to US households from 2019 to 2022. One thing it shows is a sizable uptick in net worth among all income groups.

Its Been a Good Few Years for Most Americans

Lots of this new wealth came from increases in the value of a household’s most illiquid asset — its home. Lower-income homeowners especially can thank the appreciation of real estate values for their increased wealth.

For Poorer Americans Real Estate Was a Growing Source of Wealth