Addressing Challenges in Today’s Financial Services Market

June 11, 2024

THE EQUIFAX MAY 2024 MARKET PULSE WEBINAR EXPLORED THE CURRENT STATE OF THE FINANCIAL SERVICES INDUSTRY, diving deep into the current economic landscape and its impact on the industry. The webinar addressed audience challenges such as overall affordability, inflation trends, loans in terms of delinquency, and account management strategies, to name a few.

To wrap the webinar, leading economic experts Mark Zandi, Chief Economist at Moody’s; Robert F. Wescott, Founder and President of Keybridge; and Amy Crews Cutts, President at AC Cutts and Associates, answered a few audience questions, sharing the insights below.

Q: What factors determine a "soft landing" as it relates to the overall economy? 

Mark: The economy is at full employment, growth is near the economy's potential, and inflation is closing in on the Fed's target.  Once the Fed starts cutting rates, I would consider this to be a soft landing. I expect the Fed to begin cutting rates by September.

Rob: Actually, there is no formal definition of a soft landing. I think it means GDP growth drops to like 0.5% or 1% but stays positive, the unemployment rate drifts up a bit but doesn’t jump 2-4 percentage points like it does in a normal recession, and inflation gradually approaches the Fed’s target of 2% inflation. We would probably need to see such conditions set in over at least half a year for there to be wide recognition that a soft landing has been achieved.

Q: Would consumer sentiment be considered “low” currently?

Amy: Consumer sentiment can be impacted by a variety of factors including concern over climate change, the political climate, wars, etc. but it is certainly correlated with inflation and currently, surveys indicate that inflation is the number one concern.

Q: How is everything with employment growth? Are there concerns of major layoffs happening anytime soon?

Mark: Layoffs are about as low as they can get based on unemployment insurance claims and the Bureau of Labor Statistics (BLS) job opening and labor survey. Overall, unemployment is low and stable across all industries, occupations, and regions of the country.

Rob: Although big companies can grab headlines with news of layoffs, the total number of layoffs in the broader economy as measured by the BLS has been stable for the past year and is actually slightly below pre-pandemic levels. There are always a certain number of layoffs even in a healthy labor market because companies sometimes need to restructure for productivity reasons or because they are struggling even when the overall economy is doing well.

Q: What is the perspective on current consumer savings and the impact these dwindling savings may have on consumers?

Amy: Wages are not keeping up with inflation, and now we have a situation where overall affordability is the main concern. For example, homes are dealing with ~$2,400 of debt just to keep up with basic expenses. 

Mark: I don’t believe that the American economy can flourish for very long with the bottom third struggling because it is not only about the economics but also about what those economics ultimately mean about our ability to respond to problems.

Q: Is there a concern that the increase of consumers having multiple jobs in response to the pricing increases is falsely inflating potential optimistic outlook on the job market?

Mark: This is not a concern. Multiple job holders as a percentage of employed is consistent with pre-pandemic numbers.

Rob: The BLS tracks how many workers hold multiple jobs. This number plummeted in spring of 2020 and has been on a steady recovery since. Now, the number of workers who hold multiple jobs is at 8.4 million – just slightly above the level of January of 2020 – and the percentage of employed workers who hold multiple jobs (5.2%) has also returned to pre-pandemic levels. Compared to January 2020, the U.S. economy has added a total of 6 million jobs while only 100,000 more people hold multiple jobs than in January 2020. Therefore, people holding multiple jobs could only account for about 1.5% of all post-pandemic job growth, so it’s unlikely that it’s a major factor contributing to the rosy job reports we’ve been seeing lately.

Q: Does throttling back energy production contribute to persistent inflation across the economic spectrum?

Rob: A substantial supply restriction of energy would cause higher prices for energy, which is a significant component of Consumer Price Index (CPI). However, U.S. domestic energy production has actually been historically strong over the past few years. U.S. oil production is running at over 13 million barrels a day—the highest rate in U.S. history (and the highest output in the world—greater than Saudi Arabia or Russia). And U.S. natural gas production is also at an all-time historical high—which is a key reason why natural gas prices are at about $2 a million BTUs—an historically low price for gas. Fracking is of course behind the surge in both oil and gas production. Surging U.S. domestic energy production is actually one of the brightest spots in the whole U.S. economy.

The monthly Equifax Market Pulse webinars feature economists, industry experts, and Equifax leaders covering a variety of topics in an hour-long, interactive session. The next webinar will take place on June 20 and discuss how to leverage consumer data for strategic decisioning.