The affordability crisis can now add wages to the mix

No matter the economic survey or poll, the message is the same: Americans are deeply concerned about what they call an affordability crisis. Yet to former hedge fund manager and current Treasury Secretary Scott Bessent, it’s a joke — literally. Asked what could be done to get Americans feeling better about the economy during recent testimony in the Senate, Bessent quipped that consumers could "turn off MSNBC," the left-leaning cable news network now called MS NOW. The response drew several loud laughs from those in attendance.

Perhaps Bessent wouldn’t have been so flippant if the testimony had come after the flood of data last week, which laid bare the challenges facing ordinary Americans, especially the rapidly diminishing leverage of workers.

A measure of wages for employees in the private sector rose 3.3% in the fourth quarter from a year earlier, the Labor Department’s quarterly Employment Cost Index report showed last Tuesday. It was the smallest increase since early 2021, when the unemployment rate was still well above 6% as the fallout from the COVID-19 pandemic lingered.

Normally, such a performance would still be welcome news, as it’s above the average of 3% registered in the two years before COVID hit in 2020. The bad news is that it’s down from 3.7% in the same quarter of 2024. The really bad news is that it’s only 0.5 percentage point above the rate of inflation, or about half the margin enjoyed by Americans in 2018 and 2019.

That’s a problem for the White House. While it has focused its messaging on inflation stabilizing at just below 3%, the real concern for Americans is that, with slowing wage growth, they feel like they are still behind at a time when jobs are increasingly scarce. Job openings are now the lowest since early 2018 if you don’t count COVID-plagued 2020, Labor Department data show. And many economists say openings are probably wildly inflated due to an excess of "phantom" listings that companies have no intention of filling.

"A sharp slowdown in employment and wage growth undermined affordability even more than inflation did" in 2025, Chris Low, an economist at FHN Financial, wrote in a recent research report. The Conference Board’s latest reading on consumer confidence backed up Low’s observation, showing in late January that it’s sentiment index had fallen to the lowest since May 2014. "Confidence collapsed in January, as consumer concerns about both the present situation and expectations for the future deepened," Dana Peterson, the Conference Board’s chief economist, said in a statement the day the report was released.

Surveys like the one from the Conference Board are often criticized for capturing "vibes" rather than reality. After all, consumer confidence tumbled in 2022, 2023 and 2024 even though jobs were plentiful and the economy outperformed, avoiding a recession that most experts said was inevitable. Fair enough, but how to explain the weakness in the so-called hard data of what consumers are actually doing?

For example, the Commerce Department said last Tuesday that retail sales stalled in December, with activity falling 0.1% among a control group of consumers used to calculate gross domestic product. That’s a massive disappointment considering the median estimate of economists surveyed by Bloomberg was for a gain of 0.4%.

Then again, it’s surprising that economists were caught off guard. Household finances have been deteriorating for all but the wealthiest of Americans. The personal saving rate tumbled from 5.5% in April to 3.5% in November, suggesting that households are using a greater portion of their incomes to finance consumption. Not including the wild gyrations during the COVID years, the last time the saving rate was this low was 2008, during the global financial crisis. Put another way, personal savings have dropped by $469.2 billion since April, or 37%, to $799.7 billion based on Bureau of Economic Analysis data.

Dwindling savings mean there’s less of a cushion to meet necessary payments, let alone make discretionary purchases. As if on queue, the Federal Reserve issued its quarterly report on household debt and credit, which showed that delinquency rates on loans ranging from mortgages to credit cards rose to 4.8% in the fourth quarter, the highest since 2017. Drilling down into the data finds that the share of credit-card loans that were at least 90 days delinquent rose to 12.7% — the most since the first quarter of 2011 — and the share of auto loans in serious delinquency climbed to 5.2%, just shy of the record reached in 2010.

In some ways, the deceleration in wage growth is a harder problem to solve than inflation. With the latter, recent years showed that old-fashioned measures such as jacking up interest rates to slow borrowing and demand still help to slow inflation. In normal times, the Fed would just do the opposite to spark demand and, hopefully, wages. But inflation is still too far above the central bank’s 2% target for policymakers to ease rates much further. Plus, the growing use of artificial intelligence is helping to boost productivity while replacing workers. "The U.S. economy is increasingly displaying the hallmarks of a jobless expansion" as employment growth stalls and wage growth softens, and businesses prioritize productivity, technology adoption and cost discipline, the economists at EY-Parthenon wrote in a research note last week.

So while Bessent makes jokes about Americans’ affordability concerns and President Donald Trump denies that there is a problem, calling it a "hoax" made up by Democrats, the administration seems to forget the reason they were voted into office: Americans felt that the economy was no longer working for them. Will history repeat itself at the midterms in November? It’s impossible to know at this point, but keep an eye on wages.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Robert Burgess is the executive editor of Bloomberg Opinion. Previously, he was the global executive editor in charge of financial markets for Bloomberg News.