Americans Spend Thanksgiving With Billions More Debt Than Last Year
Americans will gather with family and friends for Thanksgiving at a time when their debt has jumped by billions of dollars, according to the Federal Reserve Bank of New York, and as U.S. consumers are grappling with high inflation, elevated borrowing costs and a slowdown in hiring.
Total household debt jumped by 1.3 percent, about $228 billion, in the three months leading up to September 2023, bringing the total to more than $17 trillion, an analysis from the New York Fed showed. Compared with the same time a year ago, debt increased by nearly $800 billion.
Debt on loans jumped by $126 billion in the third quarter of this year and stood at a little more than $12 trillion. Meanwhile, credit card debt ticked up by $48 billion to more than a trillion dollars, a nearly 5 percent jump for the quarter. Car loans increased by $13 billion, to $1.6 trillion. Student loans, whose repayments resumed in October, rose by $30 billion to $1.6 trillion.
The rise in debt comes after Americans spent billions of dollars over the summer and fueled economic growth of nearly 5 percent in the three months through September.
The numbers also showed that new mortgages fell by $386 billion, consistent with a real estate market that is struggling under the weight of high prices and elevated mortgage rates. But Americans still looked to finance new car loans, a sector that saw nearly $180 billion worth of new loans. Limits on credits increased by nearly 2.5 percent, which came to about $113 billion.
There was also a rise in debt delinquency, up by about 3 percent overall. Millennials and Generation Z had the highest rise in credit card delinquencies. Millennials saw a 2.9 percent increase in delinquencies, while Gen Z registered 3.1 percent.
"Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth," Donghoon Lee, economic research adviser at the New York Fed, said in a statement.
"The continued rise in credit card delinquency rates is broad based across area income and region, but particularly pronounced among millennials and those with auto loans or student loans," he said.
Household debt has jumped this year by billions, according to data from the Federal Reserve Bank of New York. The total is now more than $17 trillion. MATT CARDY/GETTY IMAGESChallenges for Consumers
Employers are still recruiting but at a much slower pace. After weeks of increases, the number of Americans signing up for unemployment claims fell by 24,000 to 209,000 in the week ending November 18, the Labor Department said Wednesday. The four-week moving average of claims was down a tick, 750, to 220,000, suggesting that many employers are not laying off workers but those looking for jobs still have challenges finding one.
"Looking past seasonal noise, we think the claims data are consistent with a job market that is cooling," Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told Newsweek in a shared note.
Americans are also worried about inflation. While the rate was 3.2 percent in October, it is below the 40-year highs hit in 2022 and above the Federal Reserve target of 2 percent. In response to soaring inflation, the central bank has set rate hikes at the most rapid clip since the 1980s , to the current two-decade high in the 5.25 to 5.5 percent range. The spike in rates has pushed up borrowing costs for everything from houses to cars and business investment.
On Wednesday, the University of Michigan Survey of Consumers showed that Americans expect prices to rise by 4.5 percent over the next year and 3.2 percent over the next five to 10 years.
Even as consumers expect inflation to remain elevated, they are noticing a decline in prices. Forty percent blamed inflation for a decline in their living standards, down from 47 percent in October. Households also had an improved sense of their personal finances, with 9 percent viewing them more favorably, compared with 6 percent the previous month. This follows a fall in prices, particularly the cost of gas. The national gas price is now averaging $3.281, according to AAA.
"The current mood reflects a balance of factors, some of which improved while others worsened this month. Consumers observed easing inflation and gas prices, which gave them an increased sense of security over their personal finances," Joanne Hsu, director of the survey, told Newsweek in a statement.
"However, they are not confident that positive developments with inflation will continue," she said. "With considerable uncertainty amid wars in the Middle East and Ukraine, as well as a U.S. election less than a year from now, consumers are concerned about the various ways the economy could take a turn for the worse."
