Borrowers Are Falling Behind on Their Bills

The U.S. Government’s Finances Are Slightly Better Than They Thought

12 hr 44 min ago

The outlook for the U.S. government’s finances got slightly better Monday when the Treasury Department found some extra change under the metaphorical couch cushions.

The government now expects to borrow $760 billion in the first quarter, down $55 billion from the most recent estimate in October 2023, the Treasury Department said in a press release Monday. The improvement comes from “higher net fiscal flows and a higher beginning of quarter cash balance,” the department said, without adding any detail.

The upgraded outlook comes against the backdrop of budget negotiations in Congress. Lawmakers have agreed upon how much the government can spend, and have until March to finalize the details and avert a potential government shutdown.

Although both parties have warned of the need to reduce the federal budget deficit, they haven’t agreed on how. The compromise deal will likely leave the $34 trillion national debt to grow unchecked, with the government continuing to spend more than it takes in every year, economists have predicted.

Could the Canal Crisis Impact The US Economy?

15 hr 46 min ago

While the impact of ongoing disruptions at two major shipping chokepoints has been limited in the U.S. so far, some major retailers may start to raise their prices as a result.

Houthi rebels in Yemen have been attacking shipping vessels in the Red Sea, and at the same time, a drought in Panama is reducing the capacity of the Panama Canal.

Europe has been hit harder than the U.S. by these supply chain snarls, but it has made shipping cargo more costly.

Retailers that rely on imports, including Floor & Decor (FND) Best Buy (BBY), Wayfair (W), and RH (RH), the company formerly known as Restoration Hardware, could all see their profit margins squeezed, and in some cases would raise consumer prices, Wedbush analysts said Monday.

Read more about how supply chain disruptions could permeate the U.S. economy here.

Borrowers Are Falling Behind on Their Bills as They Use Credit to Keep Spending

16 hr 6 min ago

More people are falling behind on their bills as inflation, the return of student loan payments, and the highest interest rates on consumer loans in decades all squeeze household budgets.

Early-stage auto loan delinquencies in December were 2.1% higher than at the same time the prior year, according to a report Monday by VantageScore, a credit scoring system that combines data from the three major credit bureaus. Early credit card delinquencies were also up 0.43% over the year. 

Indeed, all four categories of credit tracked by VantageScore—auto loans, mortgages, credit cards, and personal loans—all had higher delinquencies than a year ago.

Vantagescore’s data sheds light on how people have been funding the recent surge in consumer spending—they’ve been putting it on plastic, and can’t necessarily pay it back. Credit card balances were 8.2% higher in December than the same month last year, VantageScore said.

The increased credit card debt is hitting households especially hard because the Federal Reserve’s campaign of anti-inflation interest rate hikes has pushed the cost of borrowing to its highest in decades.

Almost half of all credit card holders carry balances from month to month, according to VantageScore. As of November, the average credit card charged 21.47% interest, the most since at least 1995, according to Fed data.

Not to mention that while inflation has cooled down lately, that only means that prices aren’t going up as much. The resumption of payments on federal student loans in October after a three-year, pandemic-era pause is only adding to the stress.

And while many people have been able to get ahead due to pay increases in a labor market that still favors workers, others are struggling to keep up.

“As we begin a new year, the VantageScore monthly CreditGauge data points to weakening consumer finances, marked by higher delinquencies across many product and borrower segments,” Susan Fahy, chief digital officer at VantageScore said in a prepared statement. “What is less clear today is whether lenders will reduce their lending to a consumer that is credit healthy overall but showing modestly increasing signs of economic stress.”

The Federal Reserve Meets Tuesday—Here’s What to Expect

17 hr 36 min ago

Federal Reserve officials are widely expected to hold the central bank’s key interest rate steady at its 22-year high at their meeting this week, so all eyes will be on the Fed’s communications.

Economy watchers will be looking for clues about whether they will cut that rate at their next meeting in March. 

As of Monday morning, investors were almost certain that the Fed will hold the rate steady in January, but are nearly evenly split on what will happen at the following meeting in March, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

“Wednesday’s gathering should serve to confirm that the FOMC has left behind its tightening bias and has more intensely begun the discussion around rate cuts,” wrote economists at Deutsche Bank Monday. “We expect this transition to be reflected in a meaningful overhaul of the post-meeting statement, which will likely drop the reference to ‘the extent of additional policy firming’ and re-focus attention on how long rates will remain at current levels.”

Read more about expectations ahead of the meeting here.

Manufacturers Are Struggling to Hire in Microcosm of Broader Labor Market

19 hr 21 min ago

More than half of manufacturing firms in Texas are hiring, but many report struggling with unqualified applicants.

According to a monthly Dallas Federal Reserve Bank survey, 52% of the 100 responding manufacturers said they are hiring workers. Of those currently hiring, nearly 70% said there is a lack of available applicants and those that do apply do not have the technical skills to do the job.

“After implementing a minimum wage of $15 per hour, we assumed that our applicant pool would increase,” one respondent told the Federal Reserve. “That hasn’t been the case. We are still trying to fill open positions that have been open for months.”

While Texas is just one state and manufacturing is just one industry, this report gives some insight into a labor market that defied expectations in the recovery from the pandemic. While their leverage has waned, job seekers still have the upper hand in the market with 1.4 jobs per every job seeker.

Because hiring has been such a struggle for employers in the tight labor market, those who aren’t hiring reported holding onto employees out of fear that they will be caught shorthanded again.

“We are likely overstaffed by about 15% right now but are not willing to lay off or cut hours as we’re unsure if things will pick up. Again, uncertainty is high,” one respondent said.

Tuesday will bring additional insight into the labor market, as the Bureau of Labor Statistics releases its monthly job openings and labor turnover survey (JOLTS).