After a big surge in credit card spending for December, it seems consumers took a break from their holiday spending in January, though the economy continued to add jobs.
Consumer revolving debt – which is mostly based on credit card balances – dipped by $3.1 billion on a seasonally adjusted basis in January to $1.09 trillion, according to the Federal Reserve’s G.19 consumer credit report. Card balances were down 3.3% on an annualized basis.
Total consumer debt – which includes student loans and auto loans, as well as revolving debt – continued to swell though, rising $12 billion to $4.2 trillion in January, making for an annualized growth rate of 3.5%.
Evolving coronavirus situation clouds outlook
In the meantime, the federal government’s employment report for February shows that the economy added a robust 273,000 jobs. The unemployment rate dropped to 3.5%, from January’s 3.6%, even as the number of working age adults employed or actively looking for work held steady at 63.4%, a sign that more people are finding jobs.
The government also revised up January and December job gains by 85,000. And average hourly earnings were up 0.3% month-over-month, and 3% year-over-year. The strong employment report certainly shows promise for continued consumer spending.
However, that report is based on input from before the coronavirus panic ensued, and that clouds the outlook. Diane Swonk, chief economist at Grant Thornton, noted in online commentary that job gains in the leisure and hospitality sectors should better position workers in those industries against any layoffs tied to the coronavirus fears.
“The weakness in transportation is more insidious as it is a precursor of what’s to come in response to supply chain disruptions associated with COVID-19,” Swonk wrote. “Imports from China plummeted in February and early March, which took a toll on some of our largest ports.”
And Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted in his daily economic commentary, “Overall, these are great numbers, but unfortunately this is news from another planet, and it does not mean that the Fed was wrong to cut rates this week. The survey was conducted in the week ended Saturday, Feb. 15, four days before the market peaked.”
Pantheon is expecting a coming slowdown in overall hiring to hit the March employment number, though there are no signs that rising layoffs will make the situation worse. It could worsen in April, though…Read more>>