Kelly Evans’ afternoon commentary & top market stories


WED, FEB 13, 2019

DJIA 25521.08
+0.37% +95.32
S&P 500 2752.16
+0.27% +7.43
NASDAQ 7428.69
+0.19% +14.07



Here's a head-scratcher:


Wage gains are accelerating, especially for low-income workers (the bottom 10% of wage earners are seeing the fastest income growth since 2000, per Strategas). Job openings are soaring (7.3 million as of last count) and payroll growth (+526k the past two months) is vastly stronger than it "should be" this late in the cycle. 


And yet delinquency rates are rising. 


Delinquency rates on auto loans have hit their highest since 2010. And it's not just there, as the charts below from Deutsche Bank's Torsten Slok show. Mobile-home delinquencies (yes, that's a data set) have jumped. Delinquency rates on second homes and home equity lines of credit are on the rise, too. 


This can go on for quite some time before the onset of a recession--years, as the episodes from the late '80s and late '90s show. 


And there have been structural changes, too, says FTN Financial's Jim Vogel, particularly when it comes to autos: "It is an error to flag rising delinquencies without noting i) they remain small relative to more auto debt; ii) they are unfortunately concentrated with younger borrowers and those with credit scores <=620," he notes.  


To that point, the number of households using LESS credit overall is also on the rise. 


Mr. Vogel again: "The weirdest number from Q4 was the lack of acceleration in credit card debt to pay for holidays." And says 34% of households are now debt-free, up from 14% five years ago. 


The fragmentation of households into those using (and falling behind on) credit versus those with no debt at all is telling us something about the overall economy--but not as much about "the cycle" as it probably once did. 


See you at 1 p.m. for "The Exchange"!






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