Americans pretty early start realizing the importance of having a job. Unlike in some other developed countries American teens test waters on the labor market at 14. Many kids that go school find part-time job at fast food restaurants, car washes, recreation and fitness centers, in retail industry, take care of animals and so on.
Most people in the US strive to have a steady job, which means a steady income. Now that the US economy is sliding into a recession, keeping a job and having a permanent income is more essential than ever. Your revenue and your ability to pay off your loans and credit card balances are closely connected. According to financial experts, job losses are the biggest factor affecting delinquency rate.
Jim Chessen, chief economist for the American Bankers Association has outlined main trends and problems concerning US economy, banking industry and credit card market during recently held teleconference.
He admitted that job loss is “…the biggest driver of consumer credit problems…” He noted that the delinquency rate (the rate of credit consumers who are 90 or more days late on their credit card payments) has grown a bit over the past few months. Now credit card delinquencies are slightly higher the five-year average. And it is not economy slowdown alone that can be found the reason for this situation.
This year around 600,000 people have lost their jobs. No wonder many of them have fallen behind their monthly payments. It is quite clear that credit card delinquencies cause great losses on the part of lenders. It is all like a vicious circle. People lose their jobs. Banks get delinquent accounts and incur losses. Economy suffers. Job market becomes unable to provide the necessary amount of positions. But is there the light at the end of the tunnel? When will American consumers see economy revival?
American Banking Association (ABA) economic advisers are predicting a slight recovery by the end of 2008. Though experts are forecasting that the economy will most probably just inch upward a bit to the condition of a “mild recession”, this is already encouraging. Peter Hooper, chief economist at Deutsche Bank and ABA economic advisory committee chairman believes that the US economy crisis is reducing to a mild recession. And, as he noted, these hopes are backed by recent surveys and analytic estimation of latest economic data.
Recent market shakeups shocked financial markets and credit consumers. Lehman Brothers bankruptcy, Federal Reserve Board bailout of American International Group Inc., Merrill Lynch sale do not give grounds for hope. And the experts confirm that things are unlikely to change dramatically for better, but the second quarter of 2009 might bring some relief. Economists expect that this is when the housing market bottoms out.
In fact, the devil is not so black as he is painted. America’s economic system is strong enough to handle the crisis. Chessen added that the current banking turmoil should not be viewed as a collapse of entire banking industry. 98% of US banks, as he noted, are well-capitalized and have billions of dollars in reserves.
ABA economists believe that the country will soon get through this economic downturn. And credit consumers will be able to take advantage of using reward credit cards, low interest cards, no fee cards and others again.
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