Stefanie Pomboy: Consumers Are Tapped Out

Exhausted consumers are "Spent Up & Lent Up", so economy will slow

It feels like a tale of two economies right now.

If you ask an economist, chances are you'll hear that the US is doing great, growing faster than its G7 peers, with low unemployment and a stock market back near all-time highs.

But if you ask the average man on the street, you'll likely hear a very different story.

One of hardship, where wages aren't keeping up with the massive spike in cost of living, where companies are reducing hours, freezing hiring or actively laying workers off, and households are increasingly forced to turn to expensive credit cards to fund living essentials.

Which of these is more accurate?

And are things likely to get better or worse from here?

For an expert view, we're lucky today to talk with Stephanie Pomboy, economic and market analyst and proprietor of MacroMavens.com.

Stephanie warns that the Lag Effect is playing out before our eyes at this point, and that increasing struggling companies and households forebode a recession ahead.

For the details on her reasons why, click here or on the image below:

---

I’m so grateful to everyone who has kindly supported me by becoming a premium subscriber to this Substack. It’s making an important difference in helping me afford the substantial startup costs of running Thoughtful Money.

Premium supporters receive my “Adam’s Notes” summaries to the interviews I do, the new MacroPass rotation of reports from esteemed experts, plus periodic advance-viewing/exclusive content. My Adam’s Notes for this discussion with Stephanie are available to them below.

If you, too, would like to become a premium subscriber to this Substack (it’s only $15/mo, less than $0.50/day), then sign up now below.

---

Adam’s Notes: Melody Wright (recorded 5.8.24)

EXECUTIVE SUMMARY:

• Stephanie predicts significant adverse effects on the economy and the financial sector due to the rapid pace of interest rate hikes. She anticipates a substantial economic slowdown, with consumers and corporations struggling to service their debt, which should lead to broader economic weakening.

• Despite optimistic indicators like GDP growth (pre-2024) and low unemployment, she highlights unsustainable consumer behavior. She notes that recent GDP is driven by consumer spending on increasingly expensive essentials for living, which are outpacing income gains and leading to increased credit card debt. Additionally, a shift from full-time to part-time jobs undermines the labor market's strength, suggesting deeper economic problems ahead.

• Stephanie describes the diminishing ability of Corporate America to pass on rising costs to consumers. She points out the concentration of earnings growth in a few large S&P 500 companies, while the majority struggle, reflecting a broader economic disparity. This situation is likely to impact corporate profits and consumer spending negatively.

• The shift from labor hoarding to labor shedding will affect consumer spending and trigger a vicious cycle of