Credit Card Debt Spikes to Six-Month High

http://money.cnn.com/2008/01/08/news/economy/consumer_borrowing.ap/index.htm?postversion=2008010815

Total consumer borrowing shoots up to 7.4 percent in November as buyers rely on credit cards in the face of housing market collapse.

January 8 2008: 3:40 PM EST
WASHINGTON (AP) -- Consumer borrowing rebounded in November as credit card debt shot up by the largest amount in six months.

The Federal Reserve reported Tuesday that consumer borrowing rose at an annual rate of 7.4 percent in November, far higher than the 1 percent rise in October. The category that includes credit card debt surged at an annual rate of 11.3 percent, a six-month high, reflecting the fact that shoppers are continuing to rely heavily on their credit cards to finance purchases since home equity lines of credit have become harder to get. The category that includes auto loans also increased in November, rising at a rate of 5.1 percent after having fallen by 3.5 percent in October.

The 7.4 percent overall increase in credit pushed total credit up by $15.4 billion - much stronger than the $8.5 billion increase that analysts had been expecting. The 11.3 percent rise in credit card debt was the seventh straight month of strong gains in this area and was the biggest jump since a 12.8 percent rise in May.

Economists believe that consumers are being forced to rely more heavily on borrowing on their credit cards with the collapse of the housing market, which has depressed home prices and prompted banks to tighten up on lending standards for mortgages and home equity lines of credit.

The five-year housing boom had prompted a lot of homeowners to refinance their mortgages and take out home equity lines of credit to take advantage of the surging values of their homes - a boom that is being reversed in many parts of the country by the current housing slump. The overall increase left total consumer credit at a record $2.51 trillion. The Fed's credit report tracks all debt not secured by real estate meaning that mortgages, a big chunk of the debt load carried by most households, is not covered.

Wall Street's Terrible Tuesday
http://money.cnn.com/2008/01/08/markets/markets_0500/index.htm?postversion=2008010818

Stocks sink again extending rough start to 2008, as major gauges fall 10 percent off recent highs - the technical definition of a market "correction."

The market was also at the mercy of technical market factors, with all three major gauges now having fallen 10 percent off the highs hit in November, on a closing level, the technical definition of a market correction. In the next few days, this could spark a much bigger leg down, or bring in a wave of new money as investors seek to buy at lower levels.

"We've gotten very oversold, and we've seen this technical correction, so I wouldn't rule out a short-term rally," said Ryan Atkinson, market analyst at Balestra Capital. "But I don't think we've put in a bottom here," he said. "We may be at the start of a bear market, which would be typical of a recession."

Although others are less inclined to call the recent selloff the makings of a bear market, it has certainly been a brutal start to the year. Year-to-date, the S&P 500 has lost about 5.3 percent, the Dow industrials has fallen 5.1 percent and the Nasdaq composite has fallen 8 percent year-to-date.

"Although the year is very young, it's a discouraging start," said Art Hogan, chief market analyst at Jefferies & Co. He said that investors are being faced with a barrage of issues that makes the market environment extremely challenging right now, including oil price shocks, nervousness around the presidential election and the risk of stagflation - an environment of slow growth and rising inflation.

49000 Construction Jobs Lost in U.S. December 2007

CNN is reporting that the United States unemployment rate rose to 5% in December of 2007. This up from 4.7% in the previous month. The hardest hit sectors were the construction industry, which lost 49,000 jobs and manufacturing which lost 31,000 jobs. In a previous posting, I did a little research to point to the potential impact on the greater economy that a housing bubble might have. In particular I stated: ***** SO, in my mind, the hit on the U.S. consumer is going to be the ultimate problem. BUT compounding the issue is the extent to which the housing industry contributes to U.S. GDP and employment: My Research: United States - 2005 Data http://www.bea.gov/industry/gpotables/gpo_action.cfm?anon=52445&table_id=19052&format_type=0 Gross Domestic Product by Industry Accounts, Full-Time and Part Time Employees by Industry, release date April 24, 2007. Construction employed 7,657,000 people in 2006. Finance, Insurance, Real Estate, Rental and Leasing employed 8,308,000 people in 2006. Gross Domestic Product by Industry Accounts, Value Added by Industry as A Percentage of Gross Domestic Product (Percent) http://www.bea.gov/industry/gpotables/gpo_action.cfm?anon=52445&table_id=19019&format_type=0 Construction was 4.9 percent of GDP in 2006. Also affects manufacturing (ie. furniture manufacturing was .6 % of GDP). Finance, insurance, real estate, rental and leasing was 20.8 percent of GDP in 2006. Total Contribution of the Housing Industry to the U.S. Economy: 26.3% of GDP 15,965,000 employees ***** So in December alone, the construction industry lost .6% of its workforce. The faller the housing industry falls, the more construction and related jobs will be lost. Keep watching. On January 7, 2008 CNN Money is now reporting that early 90,000 mortgage jobs were eliminated in 2007 and more cuts are expected. http://money.cnn.com/2008/01/07/news/economy/mortgage_jobs.ap/index.htm?postversion=2008010713