Baby You Can Drive My Car Because You Don’t Have One



It looks like it’s official: The consumer purchasing frenzy is slowing down, and auto sales are among the biggest victims.

According to Yahoo News, auto lending is slowing down after eight years of strong sales as missed payments rise. That’s partly because, as Business Insider’s Frank Chaparro recently detailed, subprime loans to people with credit scores of 600 and below are booming.

This big-ticket item is one reason to be worried about the lending slowdown, especially with concerns that the industry has plateaued after seven straight years of growth.

The spillover effect from falling retail sales in March was worsened by a 1.2% drop in auto dealership sales—the third straight monthly drop in auto sales. Since cars need gas, this translated into a 1% drop in gasoline sales and a 1.5% drop in people buying building materials.

According to David Rosenberg, Gluskin Sheff’s chief economist, new auto loans fell 17% at JPMorgan and 29% at Wells Fargo year-on-year in the first quarter. One reason is that big banks that make car loans are tightening loan standards as missed payments and car repossessions increase.

In related news, household debt is on the rise, and U.S. retail sales fell for a second straight month in March, which is another sign that consumer spending has weakened so far in 2017. This weakness happened despite the healthy labor market.

More bad news is that household debt rose in the first quarter of 2017 to $12.73 trillion, exceeding its peak in the third quarter of 2008. Student loans account for 10.6 percent of that total, up from 3.3 percent in 2003, while housing’s share, though still great, has fallen back to 2003 levels, according to data from the Federal Reserve Bank of New York.

And more bad news from the Commerce Department: Retail sales declined 0.3% in February and 0.2% in March 2017, above the expected 0.1% drop economists predicted. This was the worst two-month sales drop in two years, following February’s revised 0.3% drop.

On the positive news side (a rarity these days), the unemployment figures for April 2017 found that 211,000 more jobs were created as the unemployment rate ticked to 4.4%, the lowest level since May 2007. Average hourly earnings increased 2.6% in March. A government report last week showed that private sector wages recorded their biggest gain in 10 years in the first quarter, but the pace of wage growth is still anemic, and it is not close to closing the wage gap or the income gap.

Short-Term vs. Long-Term Economic News

So what do all these numbers mean?

For the average American, not much.

Economic news is usually based on short-term data changes (monthly or quarterly), but individuals gauge their household net worth creation over decades.  The picture is much darker if individuals look towards the long term, such as saving for retirement or buying a house.

The latest news is that increases in health care costs and taxes for the middle class will all increase in the Trump-Republican administration. After all, who else will pay for the tax cuts to the wealthy and a military buildup?

The other problem is that corporations plan to reduce their pension plans due to changes in accounting rules and premiums paid to the Pension Benefit Guaranty Corporation. This is the topic of the next story, but this means the costs of individual health care will rise or become more uncertain. Medical bankruptcies will increase as people cannot afford major medical expenses. Planning for the financial future will become much more difficult for average Americans, especially Millennials, who, for the most part, are not equipped to manage investment over the remaining decades of their working careers.

Then, if they are lucky enough to have jobs with pension plans, Mercer Consulting estimates that within the next five years or so, many of those plans will be phased out and replaced with annuities or lump sum payments.  This transition from pension to annuities or lump sum distributions will significantly benefit the financial services and insurance industries more than individuals. As we discussed on this site many times, this demonstrates a pot of gold at the end of the lobbying rainbow for the financial services industry, the largest and most active in Washington. The main focus of this lobby is to advance all anti-individual investor bills or regulations.

So, if you are a Millennial or a younger worker, you will face more financial and career risks than any other generation in U.S. history. You are the uber-generation for retirement and health care. There is no sense of corporate responsibility to workers (and, in too many cases, the environment) under neo-liberal, conservative capitalism. After all, as the economist Milton Friedman insisted, the only purpose of any corporation is to appease shareholders. By that, he did not mean the poor mope who owns shares in their 401(k) (you lost those voting rights anyway if you read the fine print in your enrollment papers.)

So even if you work for someone else, act as if your future depends only on your actions. No employer cares about you after your labor is no longer needed. Or, as they say in the movies, “Don’t let the door hit you in the ass on the way out.”

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site,, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).


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