Permanent Jobs And Permanent Job Losses

Even the feds haven’t been able to keep up. Without the government having taken over student loans in the wake of 2008-09’s Great “Recession”, there’d have been almost no additional consumer credit extended during the decade since. It’s one more facet to the recovery-less recovery; like Japan, a dominant even overbearing government influence that doesn’t stimulate anything but its own proportionally larger footprint.

Given all that, the “need” for maintaining its footprint during the current recession is that much more paramount. With an employment crisis far worse than twelve years ago, any channel for raw aid, even student loans and stipends for those unfortunate college graduates staring into this even deeper labor market abyss, is an absolute necessity.

Uncle Sam may be willing but colleges and universities haven’t been. So far as consumer credit has been concerned, the singular positive boost in it has experienced waning growth, too. According to the Federal Reserve’s latest estimates for December 2020, federal government holdings of consumer credit rose “just” 4.8% year-over-year.

While that’s clearly the best so far as the whole segment may be concerned, at the same time it’s the lowest rate since October 2007. Better than 7% late in 2019, you don’t have to go back that far for double-digits (2017). In other words, though the rate has been slowing since the takeover in 2009, over recent months it has decelerated noticeably faster having into 2021.

These updated estimates for consumer credit beyond the student loan portion of them suggests only continued caution and risk-aversion – both consumers and debt issuers. In particular, revolving credit balances keep declining as they are, in the aggregate, paid down by consumers as workers who don’t (yet?) see a legitimate rebound on the horizon. Just like PCE estimates follow labor income, so, too, does the propensity for discretionary borrowing.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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