Double Trouble: Credit Use Decline Mirrors Gloom of Jobless Rate

MoneyOn the same day that a 10.2 percent unemployment rate made headlines, here’s another bit of sobering news: Consumer credit fell in September for the eighth straight month.
It is the longest, consecutive decline since the Federal Reserve started keeping records of consumer borrowing in 1943. The unemployment rate hit the highest level since 1983.
The two separate economic findings are, in effect, intertwined – as the credit industry is fully aware. Record levels of joblessness almost always equates to higher credit card defaults and delinquencies, or late payments.
Unemployment and delinquency rates are commonly tied together, as more people stop paying their credit cards as they lose their jobs.
Moreover, cash-strapped consumers, even those who are employed, are reluctant to take on additional debt in the current economic environment.
Revolving credit, which includes credit card debt, dropped $9.9 billion, or 13.3 percent, to $898.9 billion, according to the Federal Reserve.  That’s a 10 percent decrease from the previous year. Non-revolving credit, which covers  car and student loans, fell by $4.9 billion, or 3.7 percent, to $1.567 trillion — a 3.8 percent drop from last  year.
Total borrowing by consumers dropped a seasonally adjusted $14.8 billion, or 7.2 percent, to $2.456 trillion in September, the Federal Reserve reported.
Economists had expected a decline in total borrowing closer to $10 billion in September. August registered a decrease of $9.9 billion in total consumer borrowing, that figure downwardly revised.
September’s total borrowing is down 7.3 percent from last year. Last August, consumer credit contracted for the first time since January 1998.
As previously reported by eCreditDaily, the major credit card issuers reported a troubling up-tick in delinquencies for September, which serves as an indicator of future credit losses or defaults.
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