People who don’t have jobs don’t run up their credit card balances.
Not much of a surprise. But in November it added up to a record 14th straight monthly drop in credit card debt.
Today, January 8, the Federal Reserve reported that credit-card debt fell by $13.7 billion in November. Total seasonally adjusted consumer debt fell $17.49 billion. That’s equal to an 8.5% annual rate of decline. The drop in total consumer debt was far larger than the $4 billion that economists had been expecting.
The consumer debt numbers lag behind such economic indicators as unemployment by about a month. But the December unemployment numbers, also released today, argue that the December consumer debt numbers will continue to show that consumers are cutting back (or that banks are cutting back for them by reducing credit lines.)
Nonfarm payrolls fell by 85,000 in December. Official unemployment held steady at 10%, average hourly earnings climbed by 0.2%, and average weekly hours worked held at 33.2. The “real” unemployment rate, which counts discouraged workers and those working fewer hours than they want, rose slightly to 17.3% from 17.2% in November.
Most of the job loss came in the goods-producing sectors of the economy where construction employment fell by 53,000 and manufacturing jobs dropped by 27,000. Jobs in the service sector fell by just 4,000.
The bad news in these two reports is obvious. The consumer sector of the economy, which makes up about two-thirds of all economic activity, isn’t showing signs that it will produce strong growth in 2010. And manufacturing activity, which had looked strong in recent surveys, suddenly seems suspect.
The good news, such as it is, is that with these numbers the Federal Reserve isn’t likely to raise interest rates any time soon.
Jim,
One of your latest videos talks about the new “Free” market and to look closely at companies and where that are squeezing their profits from. Your examples talk about commodities and manufactured goods, but what is your take on service sector products. Do you see the same trend there being a low cost basic level service then higher cost add-on levels?
The name of the game right now for a business/ person is to stay lean and mean and clear as much debt. If you have a job be thankful. And as was stated above, people are not going to spend till they feel secure in their future.
Market_dogma
Well I have to say these numbers don’t match what is happening at our company. We do automotive parts and in the US, my buddies are working 84 hour work weeks. Seven days a week 12 hours a day. The demand has picked up considerably. We are also working that same amount of hours in China. Growth is coming from both markets and we are having trouble keeping up with the demand.
I think many companies have cut to the bone and will take advantage of employees until the job market actually comes back. Some companies probably need people, but will not hire. If you dont work these hours, you could be the next on the chopping block, so everyone keeps working as many hours as it takes to keep their job.
On top of the unemployed looking for jobs, their are many people in this type of situation in the economy who are also looking for jobs, just to be able to scale down hours. All work and no play makes Jack a dull boy.
With this activity going on, I’m seeing a widening of the haves and have nots amongst my customers…
These numbers only point in one direction . That is very slow growth and it will only happen when the consumer is comfortable with there personal finances. Most of the working class is more concerned about the basics, than a new tv or a non essential item. Its going to be slow going for at least two more years until the personal financial picture gets better.
Where will the growth come from?, I think right now, most people believe Brazil, Russia, India, China…
All we have to do is figure out a way to sell them our inexpensive, fantastically engineered, well manufactured, beloved brand named, consumer goods…. Oh, shit… wait a minute, where is the growth going to come from ???
The stock market is up !
And, it looks like it is going higher !
Maybe all those who are unemployed, and underemployed should put their unemployment checks into the stock market, then just sit back, and get rich…
Jim,
Good question! If you knock out the UK as per your prior concern over their debt rating, and Japan’s continued weakness – that leaves little fuel for growth. I don’t see the Fed raising rates until they can feel secure at least one to two quarters beyond mid-2010 (when the current stimulus package winds down).
I also think there is something very fundamental going on in the US. In simple terms, I think economists underestimated the extent to which US consumers are able to pull back. I mean really, after 4 TV’s, three cars, two homes, computers for all the kids, cell phones in every pocket — does anybody really need this stuff? I think not. And I don’t see the vast majority digging there way to infrastructure heaven either.
So, where is the growth going to come from – ?
commodities has been on a tear lately, with factory production slowing down, I don’t see anything that can sustain this rally.
Jim, do you think there is a correlation between developed countries unemployment and buying ‘cheap’ overseas good and services? Is this re-enforcing to invest in Emerging Markets? Are they exploiting internal and international economic situation and for how long? I am currently living in Italy and I hear more and more Italian people saying that they cannot afford to buy Italian any longer. It is the same in other Countries? Is there any technological know how transfer going on? Will we be profiting of the situation ‘only’ because we still have capital to invest in them? Are we participating on this geopolitical epic transformation of world’s order? It seems to me a repetition of the industrial revolution. It took place in UK but the USA profited the most.