#2023 was just a string of financial crises

[alistair-theirins-tits]

2024 please be niceys to me

[bbcnews03]

The study also showed that people’s incomes are gradually rising in proportion to their debts

Credit card debt continues to hit record highs, but the overall balances are less than the pre-pandemic levels and the average balances are less than the borrowers’ incomes, and delinquencies are stabilizing.

Credit card balances are higher but so are the paychecks of many borrowers.

The Federal Reserve Bank of New York reported this week that U.S. consumers have racked up a record $1.17 trillion in credit card debt.

However, the researchers pointed out that although there are still significant dangers associated with accruing large balances, the evidence shows that “increases in debt loads are still easily bearable” by the average consumer.

It is a discovery that may come as a shock to the electorate after a recent election in which the majority returned the federal government to Republican control due to economic discontent.

But while major, chronic household costs persist to burden millions of families, especially those with lower income levels, President-elect Donald Trump is set to take over a sound overall economy buoyed by consumers’ unrelenting spending spree.

Indeed, many are doing so without much serious economic consequences.

Another report this week from the credit rating agency TransUnion revealed that the pace of credit card delinquencies is moderating, dropping from 2.43% in Q3 last year to 2.34% in the same period this year.

One of the reasons for the improvements is pay. Earnings growth has been 6.2% per year since the start of the pandemic while the cumulative debt balance has increased by 4% per year.

For this reason, the debt to income ratio among the consumers in the United States has been gradually coming down in the post Covid period from 86 percent in 2019 to 82 percent as of now, according to the report.

That is even as credit card balances climbed to stratospheric levels, increasing by $24 billion only in the third quarter, 8.1% more than a year earlier.

And disposing of it they are. The Commerce Department released figures on Friday that showed that retail sales were up 0.4% in October.

That’s below September’s revised 0.8% increase but marks a strong string of spending leading into the holiday shopping season.

Payroll data from the Bureau of Labor Statistics showed that hourly earnings increased 0.4% in the last month, which is better than expected, and the inflation rate has not outpaced wage growth since January 2023.

That dynamic has meant the median-income household is financially in a better position than it was before the pandemic.

The average salary demanded by Americans from employers has risen to a record $81,822, according to the New York Fed in its latest survey this spring, forcing many employers to continue to increase offers even if the job market is cooling.

“When inflation was higher and costs were outpacing income, more often than not, it was credit that filled the void,” said Greg McBride, the CFA at Bankrate.

“Now that inflation pressures have moderated, prices are still going up, but they’re not going up as fast, and incomes are once again going up at a faster rate than expenses.”

Still, the New York Fed report shows just how normal it has become for so many Americans to be in the red.

The data also leads to the following questions regarding the impacts of persistent debt to the households of different classes in an economy that is characterized by extreme levels of income inequality that is still largely defined along the demography.

The researchers pointed out that these aggregate measures do not reflect the true borrower income, race and age at the household level and while delinquencies have slowed down, they remain high and are still causing stress to borrowers.

“Debts — and incomes — are not distributed evenly over the population,” they said.

For instance, as the report pointed out, after the financial crises of the recent decades, lenders successively raised the requirements for mortgage towards older, higher income, and better credit quality borrowers.

Some of the changes in the degree to which households are managing their debts also captures who gets credit in the first place.

TransUnion also observed a similar trend in its report indicating that credit card issuers “in many cases have tightened underwriting standards which may have resulted in lending to borrowers less likely to grow balances quickly.”

“Such borrowers with credit card and auto loan look very different from the higher income earners with bigger mortgages,” the New York Fed researchers said.

McBride said auto loans can be particularly challenging to navigate if one has a constrained budget.

He said many borrowers are still paying for more expensive cars because of the sticker prices that came with the post-pandemic effects, and this can be problematic even with a good car note.

“What that means is the balance declines more slowly,” he said.

Thus, credit card and auto loan delinquencies are the highest in a dozen years, even for the higher-risk borrowers, and this is with unemployment at 4%.

Those numbers would go up in a big way if the economy hits the skids.”