Hi, I'm Ryan Boyle, senior economist for Northern Trust. Like most people, I find myself in a bad mood from time to time. On those occasions, no amount of good news is enough to improve my sentiment. Collectively, American consumers are not in the best of moods at the moment. Sentiment indicators are still well below pre-pandemic levels, but if we take a step back, there are many reasons for cheer.

One source of uplifting news is the Federal Reserve's Survey of Consumer Finances. This report is published every three years, so the current edition offers an illustration of how household finances changed from 2019 to 2022.

Despite numerous pandemic disruptions, most households came out of the pandemic in good shape. Real median household net worth increased by nearly 37%. Homeowners drove much of that change as homes surged in value while mortgage obligations held steady. We are taking control of our fortunes, as record shares of households reported owning small businesses and holding stock directly.

The core of the recovery has been the job market. In the summer of 2022, we caught up with the employment peak seen in February 2020. In every month since then, we have set a new record for the number of Americans employed. Jobs have been plentiful in a way not seen in any past recovery cycle with estimates of job openings soaring to new records. Stable employment has allowed us all to keep spending, as consumption has led the economic recovery.

So why do we feel so bad? Inflation ate up wage gains through much of the cycle. It feels wonderful to get a raise until higher gas, grocery, and rent payments take their toll. Most of us get raises only once a year, but inflation is a burden that hits our wallets every day. And when we say inflation is lower, that doesn't mean prices are falling, only that price increases are diminishing.

Another source of apprehension is the rise in consumer credit. Card balances have soared to new highs. That's not necessarily a problem. Those figures are nominal, meaning they have been pushed higher by inflation. I pay closer attention to delinquencies, which are trending upward beyond where we left off in 2019. Even those who can handle their debts are paying more to borrow, as mortgage and auto loan rates reach levels not seen for over 20 years.

As we look ahead, I see more reasons for optimism than for gloom. The job market remains quite favorable for workers with job openings holding at high levels. Layoffs do happen, but hiring is keeping pace. Wage gains remain historically high. And for the past several months, growth in average hourly earnings has been stronger than inflation.

So there are certainly causes for concern, but the finances of most American households remain sound, providing a lift for the economy and, hopefully, the national mood.

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