Americans Borrow at Fast Clip; Planned Job Cuts Up From ’97
American consumers increased their borrowing in October at the fastest pace in more than two years, providing a solid spending base for holiday sales, Federal Reserve figures showed Monday.
A separate report showed that the number of planned job cuts by U.S. businesses increased 9.3% in November from a year ago, putting the annual total on track for the most in five years.
Credit outstanding grew at a 9% annual rate to a seasonally adjusted $1.29 trillion, up from rates of 4.9% in September and 3.9% in August, the Fed said. There hasn’t been a faster increase since July 1996.
Economists said the gain was significant, coming during a month when Wall Street was in turmoil and the Federal Reserve was in the midst of cutting interest rates to restore confidence in the U.S. economy.
“The fact that borrowing was still quite strong when anxiety was peaking indicates a strong base for Christmas sales,” said Jacksonville, Fla.-based economist Lynn Reaser of NationsBank Corp. “Consumers have access to credit and they’re willing to use it.”
The borrowing also helps explain why the U.S. personal savings rate went negative for the second consecutive month--for the first time on record. The personal savings rate is savings as a percentage of after-tax income. Another factor is that in addition to borrowing more, consumers are spending part of their stock market gains.
Growth in consumer credit in October was led by a catchall category that includes loans for education, vacations, mobile homes and boats. It shot up at a 19% rate, the most in three months.
Revolving credit, primarily credit cards, advanced at an 8% rate, the fastest in four months.
Auto lending increased at a moderate 3.5% rate after three months of strong gains.
The report does not include home-equity loans.
Consumer spending has risen for more than two years. The last monthly decline was reported in June 1996. Personal income accelerated in October, rising 0.4% after a 0.25% increase a month earlier. The last decline in income was a 3.9% drop in January 1994.
All that spending, though, cut into Americans’ bank accounts, sending the U.S. savings rate to minus 0.2% in October, down from minus 0.1% in September. The savings rate turned negative in September for the first time since the government started keeping monthly figures in 1959.
The employment firm Challenger, Gray & Christmas said in its monthly survey Monday that planned job cuts by U.S. businesses grew to 51,642 in November from 47,241 in the same month a year ago..
Still, unemployment fell last month to 4.4%, just above a 28-year low of 4.3% in April and May. U.S. companies added 267,000 jobs in November, up from 145,000 in October, suggesting that as some companies, particularly in manufacturing, cut workers loose, others are picking up the slack.
Among the industries showing the largest increases in planned job cuts this year are electronics, industrial goods and computers, the survey showed. So far in 1998, U.S. businesses have announced plans to cut 574,629 jobs, the survey showed, about 40,000 behind 1993’s total of 615,189.
However, November’s total planned dismissals were 43.6% below October’s 91,531--a 33-month high.
Multinational corporations are doing most of the cutting, while hiring by small- and medium-sized firms helped push down the November unemployment rate to 4.4%--just shy of a 28-year low--from 4.6% in October.
