Written By: Ingo Winzer, President of Local Market Monitor, Inc.
March 22, 2018: One reason a lawyer might pay off a porn star with a home equity line rather than a credit card is that interest rates on credit card balances are very high, around 15 percent at a time when inflation is only 2 percent. The high rates are needed partly because banks constantly have to write off credit card balances that are uncollectable. This can be a big deal - the 2008 recession pushed 'charge-off' rates over 10 percent.
Current charge-off rates are around 3.5 percent, far from the danger level, but they have been increasing - back in 2015 they were below 3 percent. And the other part of the picture - credit card delinquencies - have also risen, from 2 percent to the current 2.5 percent.
This news isn't yet ominous, but it could quickly become so because of the outsized role that consumer debt now holds, both in the profitability of banks and in the ability of consumers to keep spending money. Regulators will focus on the stability of the banking system, but the bigger problem will come from the consumer side. We don't know at what level delinquencies and charge-offs will become dangerous because consumers have never carried so much debt, it's new territory.
Jobs in February were up 1.6 percent from last year, pretty much the same story we've seen in previous months. Jobs were up 1.8 percent in manufacturing, 2.4 percent in business services, 1.9 percent in healthcare, and 2.2 percent at restaurants. There was a very small increase in retail and in government.
It's too early to know how much of an impact the recent tax restructuring will have on jobs or income.