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While
economists and the mainstream media tried hard to get everyone excited by
today's "better-than-expected" employment report (which included an unusually large and likely-to-be-reversed spike in hiring in the
"Couriers & Messengers" category),
they failed to mention one thing: even if they're
are a few more jobs around, that doesn't necessarily mean Americans are going
to go out and start buying stuff.
For one thing,
they have a lot of other obligations to take care of first.
As Card Hub CEO
Odysseas Papadimitrioas
seems to make clear in a CNBC
Guest Blog post, "Break Out the Budgets,
Study Reveals US Consumers Increasingly Overleveraged," U.S. consumers haven't made any real headway when it comes to
paring down high debt loads and getting their financial houses in order.
During the
third fiscal quarter of 2011, U.S. consumers added $17 billion in new credit
card debt, wiping out what remained of a $33 billion first-quarter pay down
and putting us on pace for a $64 billion net gain in credit card debt during
2011, according to a Card Hub study.
First-quarter
debt pay downs are typical, as the first fiscal quarter of the year is when
companies give out yearly salary bonuses, the IRS serves up tax refunds, and
we’re still committed to New Year’s Resolutions. But in neither
2009 nor 2010 was a first-quarter pay down consumed entirely by the close of
the year’s penultimate quarter. What’s more, according to the
aforementioned study, the amount of new credit card debt incurred during Q3
2011 was 58 percent and 154 percent higher than what was added during Q3 2009
and Q3 2010, respectively.
These trends
clearly display that overleveraging of unsecured credit cards is getting out
of hand. This may not pose an immediate threat, but what happens if the
European debt crisis sours and unemployment starts to go back up?
Indeed, a
separate report from Reuters,
"Holiday Hangover Means Slow 2012 Start for Stores,"
pretty much confirms that the only thing many people seem to have in their
wallets nowadays is overused plastic, along with the receipts for things they
can't afford (and the uncomfortably large balances they're carrying on their
credit card accounts).
U.S. retailers
are facing their biggest post-holiday depression since 2009 as consumers wary
about the economic outlook cut back on spending to pay off credit card bills
accumulated last month.
"The first
and second quarters this year will see a deeper low than last year. Sales in
the week after Christmas were so strong that took a bite from January,"
retail consultant Jan Kniffen told Reuters.
...
As shoppers
felt more confident about their finances and shopped more online, credit card
usage rose after three years of major cutbacks in credit card use, a study by
the America's Research Group showed.
"January
post-holiday sales are expected to plunge to some of the lowest levels in
years, thanks to a surge in credit card spending over the Christmas
season," said America's Research Group Chairman Britt Beemer.
Beemer said
credit card usage this year was up around 25 percent over last year.
"Now that
those credit card bills are hitting mailboxes," shoppers will cut back
in a very significant way relative to January and February of the last few
years," Beemer said.
That said, the retailing
sector was higher today, so I guess the "smart
money" knows something we don't.
Or do they?
Michael J. Panzner
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