Consumer Delinquency Rates Grow, Unemployment to Blame

A recently released report from the American Bankers Association (ABA) showed that 3.35 percent of consumers were behind on their loans during the first three months of this year, compared with 3.16 percent in the last quarter of 2008.

These consumer loans include home equity loans, home improvement loans, direct and indirect auto loans, marine and RV loans, mobile home loans and personal loans. Of those categories, the delinquency rate on direct car loans grew the most from 2.03 percent to 3.01 percent.

ABA chief economist James Chessen said in a statement:

“The number one driver of delinquencies is job loss. When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”

More than 2 million Americans lost their job during the first quarter of 2009, the same period of the survey and more than 6 million have lost jobs since the start of the recession.

Chessen also said that in order to try to brave the stormy economic times, more people are trying to pay down their debts, spend less, and save more.

The Wall Street Journal points out that these moves are not likely to lead to a financial recovery, even though they happen to be sound personal fiscal practices:

Restrained incomes and higher saving promise a grinding recovery with the threat of deflation and a lackluster outlook for the country’s banks and cyclical industries. The wild card is whether authorities push aggressively for a politically more palatable but ultimately dangerous alternative: Inflating those debts away.

And Laura Northrup on the consumerist blog poses the question that has been on the minds of many for decades:

Who will save the U.S. economy if consumers can’t return to our habits of buying crap we can’t afford and don’t need?