Credit Card Defaults and Unemployment Rates on the Rise Again (Forbes)   Leave a comment

After months of credit card defaults and unemployment rates decreasing, the latest S&P/Experian credit indices and the U.S. Bureau of Labor Statistics data show that April 2011 is a whole different story. Data released through the month shows an increase in the number of Americans who defaulted on credit cards and lost their jobs.

The Numbers

The data recently released for the S&P/Experian Consumer Credit Default indices through April 2011 reports changes in consumer credit defaults. April marked the first time in eleven months that there has been an increase in bank card rates, and second mortgage rates also showed a significant increase. Bank card defaults rose from 5.59% in March to 5.91% in April, while second mortgage defaults rose from 1.42% to 1.51%. Additionally, according to the U.S. Bureau of Labor Statistics, the unemployment rate went from 8.8% in March to 9.0% in April, back to where it was at the beginning of the year.

What This Means

In April, credit card default rates increased by 5.71% from the previous month, but this is still an overall credit card default rate decrease of 35.45% from the same time last year. Second mortgage rates are also down by 39.39% from this time last year, despite the fact that there was an increase of 6.03% from last month. The Managing Director and Chairman of the Index Committee for S&P Indices, David M. Blitzer, questions whether these changes are simply temporary or the beginning of a descent backwards.

As far as unemployment rates are concerned, the lowest rate in 2010 reported by the U.S. Bureau of Labor Statistics was 9.4%. Therefore, 9.0% might not necessarily indicate that things are worsening. Though there are ups and downs, the economy has been slowly recovering. Hopefully, we will see unemployment rates climb back down to 6% or even 5% as they were back in 2008 before the worst of the economic downturn had hit.

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Posted May 28, 2011 by ilanamelissagreene in Uncategorized

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