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Will the Financial Binge of 2017 End the Decades-Long Economic Recovery?


U.S. households saved just under 3 percent in November of 2017, according to recent data. The figure is the lowest since 2007, suggesting that many Americans are binging instead of saving.

There is no doubt that U.S. households are optimistic about the direction of the economy, with only 15 percent of Americans stating in the recent consumer confidence report that it is hard to find a job in the current economic climate. The figure is at its lowest level in over 16 years. Analysts who predicted unemployment would fall below 4 percent this year are looking prophetic.

Many economists speculate that demand for jobs will ebb and flow for much of the year, with an increase in the second half of 2018. Rita Sahu, the vice president of Moody’s, believes the banking sector will remain stable for most of 2018 due to very low unemployment and rising interest rates. However, she pointed out that credit card debt and auto loans could be “negative outliers”.

Credit card charge offs jumped to 3.6 percent in the last half of 2017, and delinquent auto loans are hovering at 2.3 percent, which is at levels before the financial crisis of 2008. 90-day delinquency rates for non-bank lenders are running at four times the level of traditional commercial banks and lenders.

The data could suggest that many Americans are caught up in the current financial frenzy and could be living well beyond their capabilities. As the savings rate declines, consumer debt is starting to rise, and many analysts believe it will continue to balloon in 2018.

Additionally, every time the Federal Reserve pushes for higher interest rates, the debt on credit cards becomes more expensive. With the lack of alarm from economists about the amount of unsecured debt in the current economic climate, and the continuing rise in housing prices, is the decades-long economic party finally coming to an end?