Consumer Debt, Job Market: A Watchful Eye in 2024

Estimated reading time: 3 minutes

Unveiling Consumer Debt Surge

A concerning piece to this puzzle is the rapid growth in revolving credit balances, which despite decelerating since 2022 is still up 9.3% y/y as of October — that’s higher growth than anything we saw during the last economic cycle. Additionally, this year has seen record use of buy now, pay later services for holiday shopping. Together, these could be signs that consumers are getting stretched, and if we need spending to hold up in order for the economy to hold up, this is a trend that deserves a watchful eye.  The bottom line is that as long as the labor market holds up, consumer spending is likely to remain healthy. Therefore, a bet on a soft landing is a bet on the consumer. And a bet on the consumer is a bet on the labor market. This is partly why so much attention has now shifted from inflation to jobs data.

Employment Report Surprises with Strong Finish

The last employment report of 2023 came in stronger than expected, which is a good thing for workers and likely a good thing for spending in the near-term. We’ll close out the year with the 22nd consecutive month of an unemployment rate below 4%, the longest such streak since the late 1960s. 

Despite the recent move back down to 3.7%, the unemployment rate had been slowly inching upward. Hiring has slowed, and job openings have fallen, though they remain above pre-pandemic levels.

Key Economic Signal for 2024

Perhaps the most important takeaway from the chart is that once a turn upward in unemployment begins, it tends to keep going and pick up steam along the way. There is a turn happening in the data, ever-so-slightly. If the increase in the unemployment rate continues to move higher, consumers are likely to get nervous. This may be the single most important economic data point to watch in the first half of 2024.

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