Keeping tabs on U.S. consumers, their bills, and their jobs
U.S. consumer delinquencies jump to highest in almost a decade
As reported by Bloomberg, delinquency rates on loans rose to 4.8 per cent of all outstanding U.S. household debt in the fourth quarter, the highest level since 2017. The rise in defaults was driven by delinquencies in mortgage payments, particularly in lower income zip codes, and student-loan delinquencies. Overall household debt balances climbed 1 per cent from the previous quarter to $18.8 trillion, with the share of credit-card loans at least 90 days delinquent rising to 12.7 per cent. The jobless rate for workers 16 to 24 years old stood at 10.4 per cent in December, near the highest levels since the depths of the pandemic in 2021.
Graph 1: The share of U.S. loans in delinquency is at the highest since 2017
Source: Federal Reserve Bank of New York
Meanwhile, according to U.S. outplacement firm Challenger, Gray & Christmas, U.S. employers announced 108,435 layoffs in January, up 118 per cent from the 49,795 cuts in January a year ago and up 205 per cent from the previous month. The total marked the highest for any January since 2009. The biggest cuts by sector were Transport (primarily UPS (after severing ties with Amazon)), Technology, Chemical manufacturers and the Media.
Graph 2: The Challenger Report: Announced job cuts Jan 2023- Jan 2026
Source: ChallengerGray.com
At the same time, companies announced just 5,306 new hires, also the lowest January since 2009, which is when Challenger, Gray & Christmas began tracking such data.
Also, job openings fell sharply in December to 6.54 million, to their lowest since September 2020. Available jobs are down by more than 900,000 just since October.
So, more people are behind on their debt repayments, and given the jobs picture, rising wages aren’t going to save them any time soon.
Elsewhere, on YouTube, William White, an economist who worked at the Bank of England, Bank of Canada, Bank of International Settlements (where he was chief economist) and the Organisation for Economic Co-operation and Development (OECD), said:
“…Lending still more money to people who are already insolvent. This is a classic mistake to say it’s a liquidity problem, and it isn’t. It’s a solvency problem. The debts have gotten so high that they can’t be serviced with interest rates at any sort of reasonable level. They simply can’t be serviced with interest rates at that level. They must be written off.”
“Using the dollar as a weapon really makes people anxious about the usefulness of the dollars that they’ve got, and they’re all looking for alternatives, and now increasingly those alternatives will be provided.”
“Each time you’ve avoided cleaning out the system by opting for the safety-net, the
system has become more and more diseased, with bad investments and bad investment practices. So the next time you need the safety net, you say, “Oh, I really have to use it this time because the system’s even more fragile than it was before.” Well, you can see where that one all ends up. So you start off and everything’s fine, but you’re on a bad path, and eventually you get to a bad end.”
“They’ve learned no lessons at all about the underlying processes that are driving these debt crises.”
White sees Kevin Warsh (the New Fed Chair Nominee) as comfortable lowering rates but not comfortable with additional Quantitative Easing (QE). White also thinks low rates will lead to more debt, which is the crux of the problem, but something most central bankers don’t take into consideration.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
