Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies. 
Please consider the New York Fed Household Credit Report for the Fourth Quarter 2023, released this week.
Consumer Credit Key Points
- Aggregate household debt balances increased by $212 billion in the fourth quarter of 2023, a 1.2% rise from 2023Q3. Balances now stand at $17.50 trillion and have increased by $3.4 trillion since the end of 2019, just before the pandemic recession.
- Mortgage balances shown on consumer credit reports increased by $112 billion during the fourth quarter of 2023 and stood at $12.25 trillion at the end of December.
- Balances on home equity lines of credit (HELOC) increased by $11 billion, the seventh consecutive quarterly increase after 2022Q1, and there is now $360 billion in aggregate outstanding balances.
- Credit card balances, which are now at $1.13 trillion outstanding, increased by $50 billion (4.6%).
- Auto loan balances increased by $12 billion, continuing the upward trajectory that has been in place since 2020Q2, and now stand at $1.61 trillion.
- Other balances, which include retail cards and other consumer loans, grew by $25 billion. Student loan balances were effectively flat, with a $2 billion increase and stand at $1.6 trillion. In total, non-housing balances grew by $89 billion.
Record High Credit Card Debt
Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.
For nearly all age groups, serious delinquencies are the highest since 2011 at best.
Auto Loan Delinquencies
Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.
Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.
Mortgage Loans
Unlike the Great Recession, mortgages are not a serious issue.
Everyone who could refinance did refinance and often at rates near 3.0 percent. After refinancing, monthly payments dropped. Finally, rising prices put risk of foreclosure very low for all but recent buyers who stretched too far to buy a house.
Yet, here again we see a small uptick across the board but especially noticeable for age group 18-29. But this will not be a replay of the Great Recession mortgage bust.
Economists are and writers are still struggling with what seems obvious if one bothers looking beyond the headline numbers.
For example on February 7, the Wall Street Journal posted Why Americans Are So Down on a Strong Economy
What’s Going On?
- In a single sentence, the economy is nowhere near as strong as the soft landing crowd thinks. That’s why people are down.
- Other than mortgages, this data is very recessionary. Consumers are struggling to maintain lifestyles and using credit cards to do so.
- The jobs picture is not rosy either, if anyone bothers to drill into the data instead of touting the headline numbers.
Jobs Soar but Full Time Employment Is Barely Changed Since May 2022
Payrolls are up by 5.77 million since May of 2022, but full time employment up only 457 thousand.
No amount of BLS smoothing can hide this.
For discussion, please see Jobs Soar but Full Time Employment Is Barely Changed Since May 2022
Jobs increased but employment is stagnant. People are taking on multiple jobs or coming out of retirement to take part time jobs because they are struggling to make ends meet.
Sudden Stop
Writers and analysts cannot see the picture, especially left wing rags listening to Biden about how lovely this economy is. Polls show the real score. So do the above charts.
I now expect a sudden stop that is going to hit the Fed in the face like a ton of bricks. But which way?
I am open to the idea of a deflationary bust or a stagflation mess. The former will have the Fed cutting rates, the latter would be an extreme world of hurt with the Fed’s hands tied, unable to cut.
Either way it’s going to be a serious problem. It will be another economic payback for general Fed incompetence for time and time again holding rates too low, too long.
Soft landing? Forget about it.
We didn’t get a credit card (in the ’70’s) untill our mid 30’s. Only old rich people had them then unless they had good income. My generation was taught how to manage money in grade school. What happened to these dimwit generations who are so in debt? Parents negligent in child rearing, lack of concern for values, etc.
Schools and media encouraged more consumption and debt
With China apparently heading towards deflation, would that not tip us in that direction? What’s Mexico doing as they are close or are our largest trading partner, are the deflating or inflating? In my mind, if both of them deflating… guess what direction we are heading. Thoughts?
De-dollarization cuts in two different directions with exiting nations like China paying a sober toll up front that can and will be corrected for as they strategically enact plans for long term prosperity and stronger global partnerships.
USA? Caught holding the bag with major stagflation from decades of Clinton/ Bush style Boomer “Me” Generation policies selling out the strength of the nation, no end in sight and no adults in the room to own the situation and get real about fixing it.
Either stupid or many are lying. I recently ditched my supervisory position in auto related mfg we’re in our 4th slowdown in the past 2 years and we are stacking racks and racks of parts that aren’t needed immediately in order to keep part of the mfg going and not losing the more skilled help. I’ve also heard a rumor that one of the big GM plants is going to ditch its 3rd shift. I am getting completely away from auto.
Not many places to go
‘Get it while you still can!’ A valid philosophy for many. I wish they were buying better stuff so my junk picking could remain useful, but alas, most of it is fit only for the landfill.
I suspect continued inflation that will accelerate again and some recessionary pressure resulting in stagflation. FJB may try to do a loan forgiveness program.
A significant factor here is a growing movement of economic self genocide. Interesting.
Atlas Shrugged
Anyone who raises kids today has no future unless they bring in six figure income and the spouse works and can pay child care. Young people overall have no future. A small percentage are high income.
Collection agencies make a buck on 90+ days C/C delinquencies. They peaked in 2008, ex : 18-29. Banks don’t report zombie loans. Those delinquencies between 75 days and 89 days, before the recycle bin, that flip to zero rates, instead of 20%/30%, but keep loans alive. Zombies reduce income on interest, but total assets are intact. In recession delinquencies will popup. The multi family 5+ units, the newest bubble, will be in trouble. Rent will bend.
It’s the same every cycle. Many people over extend themselves and are forced to live off their credit cards. Eventually, circumstances often catch up with them before they hit the lottery and then they either learn to buckle down financially or they wind up in bankruptcy.
Apparently many in that age group now believe that re-payment of debts is “voluntary”.
I wonder what could have given them that idea?
It is voluntary. You didn’t say anything about consequences.
There are SEVERE consequences in the future. If you’re seriously delinquent and/or file bankruptcy you’ll pay for it by either not getting credit at all or having to pay a really high rate. Many won’t be able to pass credit checks to rent or afford to buy a car. Some people need to learn the hard way.
Maybe they learned it from boomer Dave Ramsey who declared bankruptcy when he was in debt. Of course, that’s not what he tells everyone else to do.
Ramsey is a hypocrite and wonder why anyone listens to that guy. I thought parents taught their kids financial responsibility at a young age. Not anymore. This is more vital now than when I was a kid.
Probably their parents, because most parents don’t teach their kids values, ethics or anything much of value.
For the political class, this is not the right time to worry about these details… Israel needs all attention now.
Oh No I’m starting to smell a batch of bail-outs starting to be whipped up in Washington.
link to youtube.com
In the words of the prophet Bon Jovi… “whoaah… we’re halfway the-ere… woah oh… livin’ on a prayer…!”
I hate Bon Jovi.
“Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.”
The other day i posted link to an interview of Danielle DiMartino Booth, partly titled, “Economy on Last Legs.”
I’ll take “stagflation mess” for $2,000 Mish.
Agreed. Starting in the latter part of the first half of 2024. Good luck to all of us.
No, worse: inflationary recession.
Having lived through the ups and downs of the last 50 years and working with consumers to help with budgeting and financial literacy let me assure folks that there is life after bankruptcy. Some use it as a learning experience and half or more end up there again in a few years. The main exception was the 14 years I worked with service members I had to explore every option to avoid BK except in the worst cases. I do think people should pay their debts but I also have little sympathy for the predatory lenders.
I’d be interested in hearing more from you about those experiences you have in that area.
Are people by and large really struggling or really living beyond their means and have been for a while? I’m not saying everyone, but I know and see people scoffing at things I did in my youth to save money and things I still do today even though I could afford not to do them.
Take student loans. Why would anyone take out these massive loans for degrees that historically pay lower salaries? No. Go join the reserves. It kinda sucks but it pays tuition, a paycheck once a month and provides cheap healthcare.
Complaining about housing prices in a high dollar area? No. Nobody wants to live in a boring low dollar area but it’s not that bad and will likely only be temporary once one saves some coin to upgrade.
Being outraged by fast food prices. Again no. Bring your own coffee and lunch to work. Maybe eat out now and then. I’d see these clowns when I worked in the office eating out daily but then complain about personal finances..meh.
I recently had a condenser fan motor go out on one of my AC units. I could have paid someone but I bought the motor, a fan puller tool and replaced it myself. Saved roughly $500. I knew nothing about changing it, just watched some videos. My neighbors look at me like I’m crazy.
“Are people by and large really struggling or really living beyond their means and have been for a while?”
I used to be left scratching my head wondering what I was doing wrong financially after observing how most of my neighbors, work colleagues, and family all seemed to be living a great lifestyle (lots of vacations, new cars, new gadgets, remodeling kitchens/bathrooms, nice homes, etc).
As I grew older, and wiser, I realized that it’s all fueled by debt…..mountains of it.
Many average Americans are debt slaves for life. Debtor’s prison has effectively been reborn by the voluntary consent of people chasing a lifestyle. It’s truely an amazing thing to behold.
So now instead of scratching my head wondering how people maintain thier lifestyle, I scratch my head and wonder why do they feel the need to go into debt to do it?
Here’s to Stanley Johnson! At least he mowed his own lawn.
link to youtube.com
I think a lot more people have real estate income. The gaping tax loopholes for real estate left by covid are causing bigger differences between those that work for a living and those living off rental income.
Agree with most of your comment about living beyond ones means, except for housing. It’s been pumped by FED/central banking charlatans forever now. It’s a necessity, not an arbitrary luxury or a tradable asset for what these crooks have declared it.
You buy where your job takes you until you retire.
Or take a job where it’s more affordable to live. I’ve done this a couple times in my life. Most people can take this step but refuse.
“Housing” is essential, but not in the quantities (square feet) being purchased. Hoarding of excess floor space by elites is pricing ordinary folks out, but that’s not the whole story. It’s also true that middle-class folks are drowning themselves in debt by paying for a lot more housing than they truly need, because lifestyle stupidity.
Housing itself only a problem for those that bought the last couple, three years… and investors. It’s the investors that will destroyed.
Sorry babelthuap, pragmatism is no longer practiced by the young in the West.
…which is why WAR is baked in the cake, and they must eliminate Trump.
Trump eliminated himself with his moronic crime spree.
Pathological idiocy. That douchebag in the white house is a one-family crime wave.
And if your aunt had balls, she’d be your uncle.
Corrupt Democrats are trying to eliminate Trump.
It’s entirely plausible that there are multiple corrupt crime syndicates all trapped in the same evil game, Godfather-style…
There is one party, the Corrupted Property Party, and it has two wings, Democrat and Republican. – Gore Vidal in the 1970s. (Nothing has changed, but the corruption is much worse and much more visible now.)
Well, the charts show why about 4-5% of adult kid sees the economy poorly. Up from 2-3%.
I see interest rates staying higher for longer. Eventually forcing lower prices in housing and autos. I see folks buying more food at Aldi’s instead of their favorite high cost place and eating out less, forcing food prices down. I see decent interest rates, and very moderate deflation, all leading to a great economy. Hopefully the Republican House will get its act together and start reducing spending and increasing revenues to get the federal deficit in a better position.
Republicans will only reduce spending as long as Biden is in the White house.
All administrations outspend the prior administration and if we are heading toward war, spending will increase significantly. Long-Term rates will then likely be higher. Un-inverting yield curve means recession.
There’s even a name for this: doom spending.
One of these times, it will be the smart play.
Yes, the plan now: When the music stops you hold all the neat stuff and the banks hold electronic unsecured debt in their computers.
I blame the CC delinquencies on the Banks! Gave too much credit away, because of greed based on the interest rates, and ensuing profits.
I blame the auto loans for the same misguided principles. Also the cheap Free Taxpayer Subsidies for EV’s and the hype too!
So default, and let them take all the vehicles back. Save as much as you can, and pay cash for a used marked down, repossessed vehicle, probably with low mileage and a warranty still intact, in about 6-10 months…
Just Do It!
Repossessed vehicles are sold with a salvaged title. There’s no warranty on salvaged vehicles, sold as is.
Journalists have become lazy. They depend on press releases and politicians that send them write ups about everything from economics, public policy, and social engineering. The “Journalist” takes the information rewrites it in their own words and takes the rest of the day off. More time is spent on the headline than the information contained in the article. Journalism schools do not prepare you to get behind the numbers or how to question what is being said by the “Expert.”
All this talk about how bad things are; but not one suggestion on how to invest to take advantage of it.
A year ago, many were singing the same tune, but at least some of them mentioned that they were out of the stock market before it crashes, and in safe 5% bills.
Of course, the S&P gained 24% in 2023.
What’s everyone’s investment plan for 2024?
Same as every other year; ) If you are under 50 you should be 100% in the S&P 500 index (where every company worth anything eventually ends up anyway). When we are older like Papa, we move toward fixed income with more stability (thank you Joe for the 4% interest). I stopped trying to pick winning stocks/bonds years ago — it cant be done by the average investor. Index it all.
Thank you for your reply Scott. Nice to see someone talk investing. An over simplification to be sure, but a reasonable take nonetheless.
I remain heavily invested in stocks, trading frequently, selling into strength and buying on weakness. It works for me, but it is time consuming and it takes a willingness to accept a certain amount of risk.
I lost trust in the indexes with the record 22% one day crash in 1987. After 1929, they said that wasn’t supposed to happen again. The Nasdaq crashed 76% in 2000-2002. That wasn’t supposed to happen either. Yet it did.
It goes up and it goes down. The only question is, do more of the stocks go up than down?
More to the point, the question is when.
And the $3000 capital loss deduction is a joke! Never indexed for inflation.
I’m 65, so I’m sticking with some 4% or more CD’s and then a nice dividend portfolio. I’m overweighed in energy and underweighted in finance as I’m not seeing good things for small and regional banks. I have a big portion of my assets tied up in a couple small businesses. These are doing well and generating very nice cash returns. My excess investment, about half of my net worth is meant to be left to kids, is in the market and diversified, as well as in some multifamily RE long term (10yr) investment funds.
Nice! Thanks for your reply!
Oi PapaDave!
I am licking my wounds from $20k losses shorting the housing stocks. But my safe 5% T-bills earned me $100k so can’t complain too much.
I’m still in 5% t-bills. Yes the S&P500 is up 24% but how much of that will you get to keep? Crashes usually result in 50% losses so be careful and always remember.
“Markets can remain irrational a lot longer than you and I can remain solvent.” -Gary Shilling
Investment 2024 strategy: T-Bills, TLT, and some discounted oil stocks. Really hard to find value with S&P 500 right now.
Nice to see you MPO. Thanks for your reply! Wise words.
Funny how the whackos downvote anything that isn’t about their whackiness.
It’s all they know.
Most of the S&P gain is due to the FAANG stocks. If those are subtracted out the gains look far different. So if you invested in the index you are OK but investing in individual stocks was hit or miss depending on whether you were in the FAANG or not.
Most of my investments remain in the healthcare sector because long term as the country ages, that’s where the money is going to be spent and those companies should see solid dividends/price appreciation. I have some oil and gas but it’s a very small percentage of my portfolio.
Well said. Thanks for your reply.
I will be keeping my growth stocks. Haven’t moved them in a few years actually. I keep my oil stocks as is. I have been steadily adding to US and European defense companies and I have a big chunk in bond funds both US and European. I have lots of cash on the sidelines, probably too much.
I don’t trade stocks much because that was my job for years so when I retired the last thing I wanted was to do was trade stocks.
Thanks Doug! Interesting choices.
You’re welcome.
The ideas in this post are broken record very low probability events, I wouldn’t be making investment decisions based on them.
Correct. Which is why I am trying to change the conversation toward investments. I get tired of listening to all the negativity.
Well, MishTalk is an Economics and Politics blog. Not sure why you look here for conversation on investments. There are actual investment blogs.
Agree. And they are low probability but high impact. Go look at what happened during the dotcom bubble in 2000 and GFC in 2008 or Japan in the 80s. The next crash will probably be the hardest. If you’re 20 or 30 years old, it’s no big deal, you can recover. If you are over 50 you may want to think twice about gambling in the casino without protection.
The way I see it, I can collect a safe 5%, wait for a crash, then get in at 30, 40 or 50% discount. If the crash never comes so be it, I have a large stock pile of cash and don’t need to be too greedy. Pigs get fat, hogs get slaughtered.
I honestly don’t know how we escape huge inflationary pressures with 1/3 of the US population collecting social security and not working and hoping the other 40% carry everyone to prosperity. Something will break and it will be big.
You never know where some great investment ideas will come from.
Five years ago, roughly, I read some great investment ideas here from Realist and Eddie. They influenced me in a big way. And in a very lucrative way.
I also follow some folks on X. But this is the only blog I frequent. There’s only so much time and I don’t like wasting it.
Nat gas pipelines pay high yields and increase distributions yearly. Large cap stocks will continue to pay and increase dividends. When I was a kid McDonald’s hamburgers were 15 cents. The company charges more for their products as the currency loses value. They and many other companies will continue to do that. Build a diverse portfolio of div paying stocks and enjoy life.
Sounds more reasonable than those here who live in fear of economic catastrophe, constantly complaining.
I am all in on a stair CD plan. Got 3 stairs now with the first due in 2 years. I’m retired so looking for more safe and guaranteed type of investments.
I so dabble in some other things, and some energy thanks to you actually.
Doing well in all investments, in terms of not losing, but not setting the world on fire either. I’m ok with that…
It’s important to be comfortable. Thanks.
Looking for more oil and gas bonds. Did well by buying Vital Energy (10.125% coupon) and Talos (12%) bonds before the recent premiums and calls. Lazy retail bond buyers just look at the Moody’s credit reports (lagging) and don’t look at recent quarterly earnings.
Nice!
Buy the losers and sell the winners. Rinse and repeat every month.
Just added two more oil wells to my collection. Staying away from the stock market as I have no time window to recover if the doomsayers end up being correct. A bit of physical platinum and gold as I needed some doorstops. Oh, and short-term rotating bond ladders of BB+ and US Treasuries. .
“Why are Americans so down on a strong economy?”
If you own a house at 3% or better and bought a car before Biden you are doing fine. However, many (mostly 18-39), are priced out of the housing market and are forced to put cars and other depreciating items on credit. Many are frustrated because the American dream of getting a degree is not paying off for them. Some have given up on the dream and opted to put things on their credit cards while they wait for the next bailout.
If the economic world is wrong again in 2024, I can point to myself (anecdotally). Not only are the aging “silent generation” parents now 85+, they continue to throw off cash to kids because they cant wait any longer (and their church is dying), I also retired last year, getting $20kish for unused vacation time and I paid off the credit cards with that. Thats my story — it may explain why we’re still spending and things are fine. And theres the “I dont want to work anymore to benefit owners at my expense” story also, increasing wages for existing proles ….
I’m betting on stagflation. I do see the problems with credit card and auto debt in the younger age groups. Inflation has really taken a toll on those that are out socially. Restaurants have seen big jumps in prices and these jumps have been larger than the wage gains. I have kids in their mid 20’s, so I see this with them and their friends. It’s a difficult time for a lot of people.
You can say “when I was your age…” but it is hard to cut back your lifestyle because of inflation. My rent is up 20%…all rent is up everywhere…so I move to where? Moving costs have skyrocketed. Car insurance up 45%. (LA so no public transport.) So where exactly do we cut back? Food? Really…*food*? We were sold a bill of goods and the politicians and private equity ghouls and the Richie Riches stole it from us. Honestly If this corrupt system burns to the ground I will not shed a tear. Match anyone?
I would like to view the LOW INCOME COHORT’S Credit Card Balances reflecting their purchases of everyday goods (Food, Clothing, Shelter related). If this number were WAY above averages, then this means that the entire Sham that we call an “Economy” is teetering on a collapse.
That is a great point. I wonder if these charges are categorized for statistical analysis? Never heard any comments regarding that. If its not done it should be. It sounds like a good way to get a good pulse on the economy.
Banks are up to their rump in credit card debt, student loans, auto loans, commercial real estate loans, and Joe Biden loans. The Fed will reimburse the banks with fiat dollars. Inflation will climb Mount Everest until a C-note won’t cover a burger and fries.
Ding ding we have a winner. A lot of doom tubers are out there telling their naive followers to hoard cash, during high inflation mind you, because there will be fire sales on new autos, boats and RVs. As if the the government is going to let the average Joe get a “steal of a deal” and not bailout manufacturers and banks.
Of course the delinquencies are up big for the younger age cohort, they just got their student loans paid off, so why pay off their credit cards or car loans? Expect that to be the next mantra of the left to buy votes for a group that doesn’t actually vote a whole lot.