We’ve discussed in prior articles how consumers aren’t leveraged. However, when someone loses their job even if they only owe a small amount on their credit cards, it becomes a big problem. Luckily, last year the government came to the rescue with very strong unemployment benefits that paid some people more than their normal job did.

$BAC Bank of America credit card days past due trends pic.twitter.com/ednjtXLuaM

— North Bluff Capital (@bluff_capital) January 19, 2021

The slide above from Bank of America shows the latest developments. Credit card delinquencies fell from March through July as we had a recovery along with $600 weekly unemployment checks from the federal government. From August to early Q4 delinquencies increased maybe because the unemployment checks expired. Since then, they have fallen (outside of 90+ day delinquencies). That’s surprising because the economy got much worse in December as there were job losses for the first time in the recovery.

Amazingly, in Q4 2020 the population 5-29 days past due was 31% lower than the prior year. It mostly worked out for consumers because they came into the recession deleveraged and the government came to the rescue. The recession was so bad that it forced the government to act which allowed us to avoid a lot of the weakness.

Retail Sales Should Bounce In January

In the week of January 16^th, Redbook same store sales growth only rose a tick to 2.2%. However, we think spending increased more than that. Congress dithered last year, but it just managed to do the right thing in time as the labor market has been weakening in the past few weeks.

961,000 people filed for unemployment benefits last week (regular state programs, not seasonally adjusted). That's down from the week before but still extremely high.

Another 424,000 filed for Pandemic Unemployment Assistance, which is up sharply.https://t.co/zmlpRhcIhO pic.twitter.com/huYdujUtmV

— Ben Casselman (@bencasselman) January 21, 2021