Consumer credit report received by the Federal Revenue shows that the people's total amount of debt has plunged in the month of June. The amount of credit outstanding fell by a record $21.6 billion in July, the sixth straight month of decline. A huge portion of the total debt comes from revolving credit which comes from credit card usage. The decline is considered to be the greatest since the Federal Reserve started receiving reports in the past. Other than that, the rate of decrease in overall consumer credit is approximately four times what the economists predicted.
Analysts say that the decline in credit is believed to have been caused by two things: consumers cutting back on their use of credit cards and the providers actually restricting the amount of credit they are offering to the public.
Many consumers keep their credit cards in their wallets which could either be because they are avoiding increasing their debts or they have no choice with the providers lowering their credit limit or both. The truth includes the increasing number of people choosing to pay off their credits and then stopping to create new ones. As a result, revolving credit in June fell by $6.1 billion from May's report.
With these figures, many economists are drawn to conclude that although recession is over, it will take some time for the country to develop. The road to economic growth implies the slow rebuilding of inventories which have been gashed in the previous year.
There are different programs that might just help rebuild the economy like Cash for Clunkers; however, they can only do so much as to provide a temporary boost in auto sales and financing. Retailers did not also quite succeed in the business during the back-to-school season. It is also predicted that the holiday season would not do any better to lift the economy.
One thing that greatly affects consumers' spending is employment. Improvements in the area of employment are predicted by many economists to come not earlier than 2010. America's unemployment rate grew to 9.7% in August. While last month, another 216,000 people lost their jobs.
With the steady increase in the number of unemployed people comes the stagnation of their spending. Scott Hoyt, senior consumer economist says that even if the country already seems to have recovered, it will take a while for the consumers to feel the changes in their lives. His claim is supported by Pierre Ellis, senior economist at Decision Economics saying that consumer spending would be growing in a relatively slow pace. Many predict that when consumers eventually get access to credit and the economy finally stabilizes, many credit card holders would opt to use their salaries over their credit cards.
Other issues that stress the public include health risks as many have been stripped off their housing and the global recession. Since mid-2007, the net worth has fallen by nearly 22%. This is not a very good picture for employment. When consumers are not buying, there is really no reason for businesses to start hiring people.
According to Ellis, "It looks like another jobless recovery".