Credit card delinquencies climb

this economy and the chinese economy both shall be discussed from american public media this is marketplace in los angeles i'm kyle risdell it is tuesday today 11 august good as it always is to have everybody this is a big data week as i think i said yesterday inflation most particularly at the consumer and wholesale levels but that's for tomorrow today we're going to sit back and take stock and we're going to do it once again with kyla scanlon she's an economics content creator also an author as well kelly great to have you back on thanks for having me let me throw you the easy one first what's your sense right now of this economy oh i mean i think this economy is kind of confusing everybody you know it's a bit confusing to figure out where the growth is coming from if the growth is sustainable if it's all ai driven how much risk that might be injecting into the economy sort of how spending is holding up the labor market inflation i feel like there's definitely more questions and answers right now all right here comes another question which of those things are you most worried about i think i'm pretty worried about some of the decisions that the federal reserve will have to make the fed always has a pretty tough job but right now balancing between the labor market and the dynamics there where entry-level hiring has had some issues and then balancing inflation where we're not really sure if prices are going to continue to tick up i just worry that the fed is going to have some tough choices on their hands as we go into the end of the year what's your sense of chairman wars i think that he has a hard job like every fed chair does i think that he's going to have some tough choices but i think that the bond market made it pretty clear that they were a bit worried about credibility they were a bit worried about the lack of guidance from the fed the market and the fed are so interlinked so i think that he's trying to extract the fed from the market a little bit but that won't come without pain new topic uh young younger people in this economy you've written a lot about it you've written a lot about how they don't really have much faith about how they are gamifying it right because nothing else seems to work talk about that for a little bit would you yeah i think that a lot of pieces have been pinned on what young people are doing they're going to the gym more they're traveling a lot they're buying up a lot of little treats and i think people are trying to figure out exactly why that sort of behavior is happening because it seems strange um but in my opinion i think all of these things are rational so i think when people look at it they're like oh i don't know what's going on with the spending patterns of the younger generation where there is this lean towards little treats so buying up little boo-boos do buy chocolate lattes whatever it may be that sort of spending is rational because they're putting off the bigger milestone spending like buying a house having kids because it feels further and further out of reach you also keep going what does that mean you know because these these younger people will be in a position in five or ten years where those decisions are going to affect the the function of the overall economy you know yeah i mean i think everybody has sort of internalized this sense of fear with ai and so i don't know if younger people if anybody honestly is really thinking about low in a couple years like i'm going to have to be very responsible like i feel like there is some element of doomerism within the spending i don't think it's all doom spending i don't totally love that word but i do think that for them there is that sense of financial nihilism it's like well why would i invest genzy is saving at a high level and why would i contribute to the traditional life path if it doesn't feel like it's in reach for me i'm going to go and do these sod hustles but i'm not going to work for a corporation i'm going to develop a small business it's not necessarily that traditional life cycle life ladder that we typically might see that that phrase you use financial nihilism that that's that's discouraging that's from dimitri kofinas yeah he coined that term in 2021 and it was around the time when gamestop was happening so everybody was piling into gamestop amc and his sense was like whoa you know these are not real things why are people buying them up they must not really believe in the underlying assets that they're purchasing there's this nihilistic tendency they just want to buy because there's this herd behavior towards buying and you can extrapolate that nihilism to the broad economy where people is you know you see it in the survey data they feel like they don't have a stake in the economy and so they just don't participate in the way one might expect but expectations are always a bit foggy to begin with do you think this is just the new normal not the nihilism and not not any of the you know sort of you know sorry theoretical stuff i mean i know you know it's you you're a much deeper thinker well yeah i mean you're a much deeper thinker about the economy than i am but but is this not true no it is it is totally true we've had this conversation we did it in march when we were doing that live event um do you think this is just the new normal i don't know i mean so okay so i really like this question quote from my former professor dr chachi where he said the opposite of rational is not being irrational it's being normal and so he's essentially saying there that the normal thing is not the rational thing to do right now what the best thing to do is to go and try out different things because this traditional life ladder is being actively threatened by ai or the decisions that the government is making or even honestly the decisions the fed might make raising rates could easily pop the ai bubble it's not necessarily a new normal it's just a different variation of normal right right no that makes sense yeah totally makes sense i'll go with that kyla scanlon she is an economic content creator she is on all the socials and you should subscribe to her newsletter because she will make you um really really smart kyla thanks a lot appreciate your time thank you wall street today not nihilism but i'll tell you what traders are definitely waiting to see which way the inflation winds are blowing we will have the details when we always have the details from the federal reserve bank of new york this morning came its quarterly report on household debt and credit big news big picture household debt overall fell in the second quarter for 17 straight quarters though that is more than four years i'll do the math for you helox home equity lines of credit have been going up marketplace kristen schwab reports borrowers tend to use home equity lines of credit to fund big purchases and the data show that's what they're using them for now says susan walker a professor of real estate at wharton we're using it for home renovation we're using it to send their kids to schools using their houses as a piggy bank essentially home equity lines of credit are the piggy bank of choice because rates have gone down the average interest rate on a credit card is just under 20 percent on a personal loan it's more than 12 percent a helox on average sits at about seven and a half percent it's a far less expensive way of borrowing surges in helox tend to mean more than 20 percent and that's because they're not borrowers are feeling confident in the economy and in their own personal economies andy walden is head of mortgage and housing market research at intercontinental exchange they're typically reserved for very high credit quality individuals it's not uncommon to see 760 780 credit scores for folks that are taking out lines of credit and homeowners are especially confident now because of rising home values walden says the average american homeowner has more than 210 thousand dollars in tappable home equity half of that equity is held by folks that have an interest rate on their first mortgage that's below three and a half percent plainly put people who bought homes during the pandemic are feeling more flush so they're using their equity to stay put remodel and get ahead but linda bell a home lending expert at bankrate cautions against banking on your home's value as wealth i think a lot of people out there a house rich cash for and this could be very expensive but i think it's a good thing because it's a good thing because it's a very dangerous because you feel like i have all this money but you need to be responsible and and understand that you can pay it back heloc delinquency rates are historically low but they tend to rise when borrowing costs go up and when the economy slows i'm kristin schwab for marketplace here's another one from that new york fed report more people are delinquent on their credit cards now that in any point since the great recession about 13 percent of all credit card balances are 90 days or more overdue a lot of people though actually fell into delinquency coming out of the pandemic and that debt is still following them around marketplaces samantha fields has that one the early part of the pandemic was a terrible time and so many ways but it was an oddly good time for many people financially federal support including, like, stimulus payments, expended unemployment benefits, helped a lot of families to stabilize their finances. Breno Braga at the Urban Institute says in the first couple of years of COVID, there was a notable decline in credit card delinquencies. But then what happened was after those programs expired, the environment became much more difficult for families. They saw a rapid increase in the price of goods, such as, like, food, housing, and transportation. And we saw a rapid increase in the number of people falling behind on their credit card payments. Josh Bivens at the Economic Policy Institute says more recently, the number of new delinquencies has stabilized. But it's at a level that's higher, I would argue, than it should be, given, like, a pretty low unemployment rate in the economy. Part of the reason for that is a lot of people are still carrying around those old debts they fell behind on, says Joelle Scali at the New York Fed. Once people miss a payment on their credit card, that sticks around on their credit report for some time. And she says lenders are now reporting and chasing late payments for much longer than they used to. So even though a lot of these credit card delinquencies aren't new, Aaron Klein at Brookings says they are still affecting people's lives. This debt overhang of people who have defaulted hasn't gone away for the millions of families affected. They're still getting called by debt collectors. Their credit scores are still lower. And all of that, combined with persistent, inflation and a frozen job market, is making it hard for many to catch up. I'm Samantha Fields for Marketplace. Coming up. Wow. So this is, what tariffs are all about. I've been trying to tell you, gang. First, though, let's do the numbers. Dow Industrials down 184 points today. Three-tenths percent closed at 53,791. NASDAQ down 159 points. Six-tenths percent, 26,445. The S&P 500 down 24 points. About three-tenths percent, 77 and 28. Credit cards, you say? MasterCard dropped three-tenths of one percent today. Visa shares, rose six-tenths percent. American Express up about six-tenths percent as well. Kristen was telling us about HELOCs. Well, we'll go elsewhere in housing news. How about that? Existing home sales declined 1.7% in July. That's the National Association of Realtors. Related, last week, the 30-year fixed-rate mortgage, almost 6.7%. 6.66% is what I saw. You chewed the math. You're listening to Marketplace. This is Marketplace. I'm Kyle Rizdahl. It is not a stretch at all, I think, to say that this second quarter of the 21st century is going to turn in very large part on the tensions between China and the United States and that those tensions, in turn, hang on the technological competition between the world's two biggest economies. New Yorker staff writer Evan Osnos spent eight years living in China in the early years of this century. He went back this summer for a reporting trip on the subject at hand. Evan, thanks for coming on. Thanks, Kyle. It's great to be here. I want to start with sort of an atmospheric question here. You say at one point in this piece that Beijing is so much quieter now, literally quieter than when you lived there. Talk about that for a little bit. Yeah, it's very noticeable, actually. I mean, partly it's electric vehicles. A lot of the cars on the road are electric and they're silent. And then the other thing is that it has the world's largest e-commerce market, meaning there's really almost nothing you can't get delivered. And so people don't have as much reason to go out. It does create a slightly strange sense of quiet in the place. This is all by design, right? It's part of the plan. It is. Yeah, China likes plans. And they set out about. The five-year variety, in any case. Exactly. And also even longer term. I mean, in 2015, they came up with a plan called Made in China 2025. And it seemed like it was over the horizon. But what they said was, we want to be. leaders in a whole range of technologies. So things from lithium-ion batteries and electric vehicles to eventually robotics and AI and things like that. And the Chinese system can go overboard in a whole range of ways. They, for instance, built too much housing. But when they set about building something like technology, it very often comes to pass. You know, it's interesting you mentioned housing because one of the things you point out in this piece is that it seems, and analysts say this, to you, that they are trying to, in their investments in technology and what they're doing now, they are trying to outrun the mistakes of the past, one of which was the huge property bubble. Yeah, that feels very noticeable. The property bubble, which started to burst in 2021, is really the biggest thing people talk about. And there are these buildings on the edges of cities that are called Lanwei Low, basically rotten tail buildings in Chinese. And these are buildings where they never found a way to get out of. They never finished construction. For most people, it's a sign of the mistakes of the last decade. And so the government has said, all right, one of the ways we're going to try to rekindle growth, and it's controversial, it may not work, is by plowing investment into technology and saying we're going to seize this moment and see if we can race ahead into the future. So let's talk about some of the things that on the surface anyway look super impressive. The amount of electricity that they are producing, the strides they've made in AI, vehicles, there are some real technological achievements that Xi Jinping has been able to engineer. Yeah, I tend to think it's the Chinese people themselves have been able to do this. Look, there is a tremendous amount of engineering talent in China. Every year they churn out more graduates in science and engineering. And part of it is they've taken advantage of a moment in America. As a scholar, a Canadian scholar named David Zweig, he mentioned to me, that if you look at the new labs that have been formed at a university like Westlake University, many of them are returnees from the United States who felt alienated from where they had been before. You mentioned this moment in America, and everybody listening to this understands what this moment is. But it is a moment of American withdrawal, intentional, very impactful in a lot of ways. Does that necessarily, though, mean that the way is cleared for China's rise? I don't think it does. What it does is it creates an opportunity for China. And in some cases, they've seized it. You know, it's not accidental, for instance, that China rebranded its foreign assistance program, China Aid. But at the same time, a lot of countries, and I heard this when I was in Europe earlier in the year, a lot of countries are feeling like they're caught between two big powers, the United States and China. They don't really, they don't really trust either of them at the moment. And so it's created a system where the U.S.-led order is in some disrepair, but it's not being replaced by a Chinese order. Instead, we're getting a period that's something closer to the jungle, what an analyst in Europe described to me as a period of unorder, where each country is building up its military, using its leverage, its choke points in global trade. So we're entering a period like that rather than simply slipping into a new Chinese-led order. That implies some degree of chaos in the years and decades to come. Well, it brings me no joy to say it, but I think a fair assessment is that the chaos that we see around us these last couple of years is a sign of these deeper structural changes, and we are smart to be clear-eyed about it. You end this piece going to a fortune teller who, I will point out here, got you for 660 yuan, about $97. It was a fair trade. You know, you're happy with it, right? So do a little fortune telling of your own, and let's say you go back in 10 years to Beijing to report another piece. What's that going to look like? I think on the surface, there's going to be a lot of ways in which AI is going to be part of people's lives. Already, for instance, you can't take out the trash, literally, without encountering AI. There are cameras that keep an eye on whether people are sorting their trash efficiently. But at the same time, there is a real unease, ordinary people, particularly young people in China, very uncomfortable about what the future holds. They don't feel like they have a voice in the shape that AI is going to take. They're not having kids. They're not getting married. We see some similar traces in the United States. And so the real question that faces both, I think, China and America is can we figure out ways to make sure that people, ordinary people, have a hand in shaping how these technologies become part of our lives and our economies? Because it's the country that figures out how to do that that I think is going to prevail in this technology race, which is about more than just who has the superior tech. Evan Osnos, he's a staff writer at The New Yorker. Great piece about China and the rise of technology over there and what it means for us. Evan, thanks a bunch. I appreciate your time. My pleasure. Thanks for having me, Kai. Thank you for watching! hey so here's something small business owners were more optimistic in july than they have been in almost a year so said the national federation of independent business this morning and as it happens that optimism coincided with a rise in the share of business owners who said they are looking to hire over the next three months hiring however ain't always easy as marketplaces henry app reports ariel vorhees runs a personal chef service in vermont she grocery shops and cooks for families in their homes and business is good she's had to hire to keep up with demand in the past six months actually we've grown from two chefs working in the business to four chefs and she may bring on yet another chef in the next few months about 20 percent of small firms are in the same boat according to the national federation of independent business owners of independent business index but wanting to fill a position and actually filling it with the right person are two very different things peter hansen is director of research and policy analysis at nfib they're going to the market trying to fill these positions and they're noticing hey the number of applicants the kind of skill level and fit of these applicants isn't what i hope for that's true for chris kessler who owns black flannel brewing and distilling company in essex vermont his brewery has a restaurant and it's been hard he says to fully staff up the labor shortage especially in vermont hospitality is real and um you know we're still looking for a couple of kitchen people kessler attributes that mostly to a restaurant industry workforce that shrank in the pandemic and never fully recovered other businesses see a more recent cause for the lack of skilled workers the trump administration's immigration crackdown alexis domato falvey with the advocacy group small business majority says the threat of deportation is keeping some employees from getting a job it's more and more difficult for people to feel that they want to come risk their ability to remain in the u.s even if they are here legally present and that points to another finding in the nfib survey even as more business owners feel optimistic the share that feel uncertain is also rising well above historical norms i'm henry app for marketplace if we're talking small business confidence we got to hear from one of our small businesses don't we eric vaughn owns eric's i've been framed that's a picture framing shop in detroit so yesterday i had to order some molding from a company that's based in canada but they have warehouses all over the states and they didn't have the particular moldings that i wanted but in canada and so you know after i placed the order she said eric i'm sorry but i'm gonna have to add 17 onto the bill and like wow so this is what terrorists are all about so you know another 17 doesn't hurt the bottom line in this but if i have to do it all the time oh yeah it would be a different story everything has gone up i just got to notice that map boards were going up in pricing transportation everybody's got the extra fuel charge and the distributors they a few of them they offer discounts on glass because a lot of times glass and acrylic they use petroleum to make it so it fluctuates and it fluctuates because of what's going on in the world and that has a adverse effect on the business so yeah it's crazy out here but um you know i have to pass it on to the client we've been busy we just came off of a exhibit a young photographer from southwest australia has a show called lowriders from detroit to la and back it was about 55 pieces and we had to use acrylic instead of glass because he said that it was going to be a traveling exhibit so the challenges that i had with the acrylic is that you know once you pull the plastic protective off the acrylic dust and particles that's in the acrylic is going to be going to be going to be in the air kind of jumps to it there was a lot of dark areas in the photographs so any little speck will show up so that was probably the most challenging project i've had since i've been in business and i've been in business over 30 years so but yeah i i never felt in this particular case i've got paid enough but it's a learning lesson and i know not to touch it ever again eric vaughn still learning lessons eric's i've been framed is his shop detroit michigan is where he is this final note on the way out today keeping track so you do not have to the street of is still closed brent crude bumped up against 90 a barrel today here though is the gas price that really matters i think trucks right diesel 5.32 each and every gallon jordan manji sunil maharaj janet winn oga oxman and virginia k smith are the digital team i'm kyle risdell we will see you tomorrow everybody this is apm