Mohamed El-Erian is losing sleep over concerns in the US economy. He worries lower-income consumers cutting spending will impact the overall economy. El-Erian also highlights potential credit “accidents” as debt gets refinanced at higher rates. He sees lower-earning households facing financial strains due to inflation and rising debt.

El-Erian, chief economic advisor at Allianz, flags two key concerns in the US economy: lower-income consumers’ financial pressure and increasing household debt. He warns of potential economic pressure if these issues lead to reduced spending. Data shows after-tax wage growth for lower-income households has been outpaced by inflation.

Lower-income Americans are facing financial challenges with rising inflation and debt. Total household debt in the US has reached $18.5 trillion, causing concerns about future income stability. Job market weakness and potential job loss due to AI are also contributing to economic uncertainty among lower-income households.

The US economy is at risk due to high levels of debt that may need refinancing at higher rates. Sectors like commercial real estate face challenges as loans taken out at lower rates during the pandemic mature. Signs of borrower distress are increasing, with rising delinquency rates and a spike in US bankruptcies.

Despite concerns, El-Erian dismisses the idea of a financial or credit crisis in the US. He compares potential economic accidents to cockroaches, unsettling but not a threat to the system’s integrity. While credit accidents and economic challenges may arise, he believes there won’t be a systemic shock.

Read more at Yahoo Finance: Investing legend Mohamed El-Erian says he’s kept up at night by 2 big problems with the US economy