In a curious turn of events, the US economy appears to be sending mixed signals, leaving economists scratching their heads and presidential candidates with contrasting views. While there are record-breaking job openings and low unemployment rates, concerns about rising credit card debt and other red flags have sparked caution among experts.

According to the latest labor market data, there are currently a staggering 8.5 million job openings, surpassing pre-pandemic levels by 1.5 million. Meanwhile, there are 6.5 million individuals who are unemployed, resulting in a job seeker-to-opening ratio of more than one. Prior to the pandemic, the ratio averaged 0.6, indicating a higher number of job seekers than available positions.

Additionally, Americans' average hourly earnings are now 22% higher than before the pandemic. Although wage increases have been slowing, they are still outpacing inflation, which means consumers' income is stretching further. This is good news for individuals as it allows for increased purchasing power and improved financial stability.

However, concerns about inflation persist. While inflation rates have cooled from their peak in mid-2022, progress towards the Federal Reserve's 2% target is expected to be a lengthy process. The unexpected rise in inflation and economic activity during the first quarter of 2024 took many experts, including Federal Reserve Governor Christopher Waller, by surprise. Waller expressed relief at the slight cooling of headline inflation levels in the April Consumer Price Index data but indicated that inflation expectations for the year ahead remain high.

Meanwhile, consumer spending, a major driver of the economy, experienced a slowdown in April. Early readings on retail spending fell below expectations as consumers tightened their purse strings. This may prevent retailers from passing on higher prices to consumers who are unwilling to accept them. While this cautious spending behavior is seen as a temporary pullback, further declines in spending could negatively impact the economy.

One of the most alarming signs in the current economic landscape is the significant increase in consumer debt. With many individuals exhausting their pandemic-induced savings, credit card purchases have risen sharply, often going unpaid and leading to serious delinquency. Recent data from the New York Fed revealed that the percentage of credit card balances in serious delinquency has reached its highest level since 2012.

Economists warn that the rising levels of consumer debt and delinquency rates could have macroeconomic consequences. As more income is directed towards debt repayment, consumers have less disposable income for other purchases, potentially hindering overall economic growth. Moreover, financial institutions may become more cautious in lending money to borrowers with higher risk profiles, which could further restrict consumer spending. These combined effects may culminate in a broader economic slowdown or even a recession, according to Sung Won Sohn, an economics professor and chief economist at SS Economics.

While the US economy seems to be in a state of contradiction, with strong job openings and recovering wages, the mounting concerns surrounding rising debt levels and the potential for a cooling labor market warrant attention from economic policymakers. As the nation navigates through these murky waters, economists and politicians alike are closely monitoring the situation, acknowledging that pockets of concern persist alongside positive indicators.