In a recent Market Pulse webinar, we discussed current data points around Fintech and alternative data to ensure you're well positioned to focus on forward. It is important to build resilience for your organization—even during uncertain times.

Taking a deep dive into the current macroeconomic landscape, Keybridge, LLC Founder and President Robert Wescott, Ph.D. delivered timely insights on not only where the economy is heading but also the importance of the Gen Z consumer. 

Additionally, Equifax Risk Advisory Leader Tom Aliff led a discussion about alternative data in fintech with Brett Manning, Principal Product Manager at Upstart.

Separately, we broke down consumer credit trends, which will be available at a later date. 

Macroeconomic Observations and Updates with Robert Wescott, Ph.D., Keybridge¹

Throughout 2024, the economy has been seemingly floating. Companies created 200,000 jobs a month, GDP growth was doing well, inflation was gradually coming down, and the stock market was setting new highs around the middle of the year. 

Then, we had a surprisingly bad period at the end of August. We heard the word “recession” mentioned at the beginning of the month. We heard about something called the Japanese yen “carry trade.” We worried about slowing job growth and an increasing unemployment rate. However, these are only a few of the factors that are stressing consumers.

The Current Macroeconomic Direction presented by Dr. Robert Wescott

There are four areas leading to the current state of the macroeconomy, as well as where it is moving, that are causing consumer stress. 

First, while the Japanese yen “carry trade” issue is almost resolved, it still set up what was to become a tumultuous August. In early 2024, Japan experienced negative interest rates and a weakening yen. Hedge funds and investors took advantage of this by borrowing money in yen at negative interest rates. They also invested in U.S. stocks like Nvidia, and booked significant profits. Yet, the Japanese economy began to strengthen, leading the Bank of Japan to raise interest rates, resulting in a sharp increase in the value of the yen. This sudden change in conditions led to a “fire sale” by these investors. Investors scrambled to find yen to repay their loans, causing a decline in the prices of certain U.S. stocks.

Next, slowing job growth has some consumers nervous. July’s jobs report highlighted recent cooling in the labor market. The report showed that job openings are at their lowest level in nearly three years.² This tripped the “Sahm Rule,” a common recession indicator. Other signs of labor market cooling include a falling average workweek and fewer weekly manufacturing overtime hours. Both indicators are now below pre-pandemic levels and still trending down.

Finally, the combination of an erratic stock market and lowered consumer spending is fueling consumer stress. Since the beginning of August, the stock market has fluctuated. Consumers started cooling their spending habits after months of overextending themselves. The household savings rate has dropped to nearly a 50-year low.³ 

The Gen Z Consumer Mindset and Why It Matters

Here are some facts around Gen Z:

• Credit delinquency risks are high for auto loans and credit cards due to expensive cars and growing affordability concerns.⁴

• More Gen Z kids live with their parents and rely on them for financial support.⁵

• Gen-Z consumer preferences are shifting product markets, valuing ethical, practical, and good value products, including used and retro goods.⁶

• Gen Z has different preferences on cars, favoring ridesharing, utilizing public transit, or walking over owning and using cars, as many work remotely.⁷

All these trends are affecting the macroeconomic environment. These trends cause businesses to think differently, from how to attract Gen Z employees to how to sell goods and services to this demographic. 

Deeper Insights and the Impact of Alternative Data in Fintech with Tom Aliff, Equifax, and Brett Manning, Upstart⁸

Credit is the gateway to make aspects of life we might take for granted possible, which is why not having access to it can be detrimental. AI-led technologies can gather a more holistic view of someone needing credit, rather than the traditional credit-scoring-only system, and help consumers reach their goals. 

Considering the current macroeconomic landscape, this technology is even more helpful because it sees the whole view of someone’s financial situation in terms of accuracy, verification, and better predictions of risk rather than the simple snapshot provided by a credit score. 

This process is not without challenges, however:

• Machine learning scientists are in high demand and expensive, necessitating careful allocation of their time.

• Feature engineering, data merging, and model integration require detailed analysis and are time-consuming.

• Contracting with vendors can be challenging as they may not be able to keep pace with fast-moving tech firms.

• Implementation of new data models poses challenges due to complex data pipelines and the opportunity cost of diverting data team resources.

• Compliance hurdles also need to be considered.

In summary, market awareness involves understanding the whole consumer. The ROI from utilizing the full scope of available data far outweighs relying on a credit score alone. 

Stay in the Know 

To receive the full experience and detail from the Market Pulse webinar, you have to be there.

You can find our monthly Small Business Insights, National Consumer Credit Trends reports, the Market Pulse podcast, and more at our Market Pulse hub. 

Finally, connect with us on YouTube and LinkedIn for even more content to help you focus on forward. 

Sources:

1. Equifax August 2024 Market Pulse webinar, Dr. Robert Wescott

2. Bureau of Labor Statistics, published August 2024

3. Keybridge calculations, August 2024

4. Federal Reserve Bank of New York, pulled August 2024

5. Pew Research Center, WhistleOut, pulled August 2024

6. thredUP, CNBC, Morning Consult, pulled August 2024

7. Morning Consult, pulled August 2024

8. Equifax August 2024 Market Pulse webinar, Brett Manning

(c) Equifax Inc. 2024.  The statistics provided in this blog are for informational and illustrative purposes only and are not intended to be used for any other purpose.