Today marks the 125th annual recognition of Labor Day in the United States. As a day set aside to commemorate the social and economic achievements of the American worker, there ought to be plenty to celebrate this year. The economy is still moving at a clip despite predictions of a pending economic slowdown. Unemployment remains low, job creation is high and for the first time since 2011, workers under 35 report being happier with their paychecks than people over 55.
The trends are good, but not all is well in the country this week. For many east coast residents, today won’t bring the usual smells of barbecue or sounds of families gathering for backyard fun. Most will be preoccupied surviving Hurricane Dorian as it marches toward the eastern coast.
Scenes of their preparations are poignant. Photos showed lines of hundreds of people standing outside grocery stores, waiting for a chance to stockpile basic necessities to ride out the storm. Reports on Friday indicated gasoline was fast depleting as cars piled into stations for a chance to fill up on fuel.
It’s a reminder that the true danger of a crisis is not the crisis itself but the threat of being unprepared.
That principle applies as much to the economy as it does for natural disasters. The country has been riding the longest economic expansion in U.S. history for the past 10 years, but that growth only came about after one of the worst recessions the country has ever seen. Have Americans been using the past decade to prepare for the next financial storm?
According to a 2018 report from the Center for Financial Services Innovation, only 28% of Americans were deemed to be “financially healthy,” meaning they have appropriate spending, borrowing and planning habits to be secure. Another 55% are “financially coping.”
Additionally, almost half of Americans report spending as much or more than they make, prompting many to rely on credit cards to make up the difference.
And speaking of credit cards, Americans collectively hold $1 trillion in credit card debt.
Those numbers can’t capture everything, and doubtless many have changed their behavior since the last financial crisis. Still, the general financial health of the country is far from ideal.
The trouble with good economic times is they discourage thrift, yet years of plenty are the right time to be laying away for the future. As the oft-repeated axiom goes, “When the time for performance arrives, the time for preparation is past.”
This Labor Day is as good a day as any to begin those preparations. No amount of precaution can prevent the inevitable from happening, but at least it offers the assurance of weathering the storm. And that is a feeling worth more than money can buy.