What is the current economic situation in the United States?

Last week, the number of initial jobless claims in the United States increased sharply, indicating that the US economy and job market are in a weak state. The US economy is currently facing three major challenges: excessive government spending, excessive reliance on the stock market, and unprecedented illegal immigration issues. These factors have led to weak economic growth, stock market fluctuations, declining consumer confidence, and pressure on wages for non skilled workers.

Firstly, national and local tax revenue is an important indicator of economic health, which is currently declining. Renowned investor Stanley Druckenmiller recently gave the Biden administration an economic policy rating of "F". He criticized Treasury Secretary Janet Yellen for excessive spending and criticized Federal Reserve Chairman Jay Powell for his ineffective response to inflation. Druckenmiller said, "Even if it's not a genius, people can see that ordinary Americans are suffering from the pain of inflation. Yellen has been spending heavily, while Powell had been incorrectly predicting the prospect of interest rate cuts at the end of last year, which has undermined his efforts to deal with inflation."

Secondly, employment remains a key factor in consumer spending. However, the main growth in employment data comes from the government, healthcare, and social assistance sectors, which are not conducive to improving productivity or promoting economic growth. The recent report from the National Federation of Independent Enterprises shows that business owners are slowing down their plans to fill positions, and it is expected that recruitment will reach the lowest level in recent years. Meanwhile, a report from the Supply Management Association shows that the Purchasing Managers' Index for the service industry fell to a contraction zone in April, indicating that economic growth in the sector has slowed down. The decrease in new orders has led to price increases, and some companies have reported accelerating layoffs. Meanwhile, in the past 18 months, the manufacturing industry has been in a sluggish state for 17 months.

And the weak job market and high inflation are leading consumers to cut back on spending. Many CEOs of companies such as McDonald's, 3M, and Starbucks have stated that low-income groups are feeling financial pressure and are cutting back on expenses. McDonald's CEO Chris Kempczynski pointed out after announcing disappointing sales results that consumers are more cautious about every expense as they face rising daily expenses. The management of 3M stated that consumer spending on non essential goods is weak, and overall spending may continue to decline.

The pressure of inflation has led to a decrease in consumer confidence in the future, with last month's consumer confidence index dropping to its lowest level since July 2022. The report from the World Federation of Large Enterprises shows that survey participants are anxious about prices, employment prospects, income, and stock prices. More respondents believe that it is difficult to find a job now.

In addition, the accumulated savings surplus and the "wealth effect" brought about by the stock market rise during the epidemic have been driving strong consumer spending, but the growing credit card debt is a warning signal that although savings are decreasing, Americans are still spending. Due to the interest rate on credit card debt being much higher than 20%, the default rate continues to rise, and expenses are also slowing down.

Overall, the failure of the US economy to achieve the expected level of growth reflects the complex situation currently facing the economy. Faced with the dual challenges of inflationary pressure and slowing economic growth, the United States needs to take more proactive policy measures to address the current economic difficulties and closely monitor potential risks in order to take timely action.