Credit Sesame’s personal finance weekly news roundup January 7, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Consumers burned through $1 trillion in savings in 2022
- U.S. regulators sound alarm over cryptocurrency risks
- Job openings remain plentiful
- Manufacturing activity weakened in December
- Mortgage applications fall to lowest level since 1996
- Pending home sales drop for sixth straight month
- Consumer watchdog takes action on predatory auto loans
- Mortgage rates rise at the start of the new year
- Job growth slows but remains solid
1. Consumers burned through $1 trillion in savings in 2022
Not only did consumers reach a record amount of debt last year, but they also used up a lot of savings. A new analysis by JP Morgan Asset Management found that consumers spent a net total of $1 trillion worth of savings they had accumulated earlier in the pandemic. Through much of 2020 and 2021, federal government assistance plus limited spending opportunities due to pandemic shutdowns resulted in consumers building up savings. Last year, an end to federal assistance, a surge of inflation and increased spending as consumers made up for lost time reversed the effect. The rapid depletion of this savings stockpile casts doubt on how long consumers can sustain their spending level. See article at Yahoo.com.
2. U.S. regulators sound alarm over cryptocurrency risks
A rare joint statement by the Federal Reserve, FDIC and the Office of the Comptroller of the Currency highlighted the importance of preventing problems with crypto-assets from leaking into the banking system. The statement listed eight types of risk the crypto sector has exhibited. The statement then went on to say that as banks attempt to expand their activities into that sector, regulators will be especially vigilant. The concern is that mixing banking with volatile crypto investments could introduce a new level of risk to deposits and conventional banking activities. See full statement at FederalReserve.gov.
3. Job openings remain plentiful
The latest Bureau of Labor Statistics release on job openings showed that they remained steady in November. There are currently 10.5 million unfilled jobs available. There remain about 1.6 job openings for every person seeking work. This strong labor demand is good news and bad news. It shows the job market is still very strong despite growing concern about a recession in 2023. However, a shortage of workers threatens to contribute to high inflation. See full release at BLS.gov.
4. Manufacturing activity weakened in December
An index of manufacturing activity declined for the second straight month in December. The Institute for Supply Management (ISM) announced that its manufacturing Purchasing Managers Index fell to its lowest level since May of 2020. The index is now below a level that the ISM considers to be consistent with a recession. See article at Yahoo.com.
5. Mortgage applications fall to lowest level since 1996
The Mortgage Bankers Association’s final mortgage application survey of 2022 found that application activity slowed to its lowest level in over 25 years. Higher mortgage rates were particularly hard on refinancing. The volume of mortgage refinance applications was 87% lower than during the same period a year earlier. Purchase mortgage applications were down by 42% from a year earlier. See full release from MBA.org.
6. Pending home sales drop for sixth straight month
Like mortgage applications, pending home sales are continuing to show weakness in the housing market. According to the National Association of Realtors, the volume of pending home sales fell by 4.0% in November. That was their sixth consecutive monthly decline. Pending home sales have fallen by 37.8% over the past 12 months. The November level was the second-lowest in the past 20 years. See release at NAR.Realtor.
7. Consumer watchdog takes action on predatory auto loans
The Consumer Financial Protection Bureau (CFPB) joined the New York State Attorney General’s Office in suing a lender for alleged predatory practices. Credit Acceptance Corporation is a lender that makes vehicle loans through a network of 12,000 independent used car dealers. The lawsuit highlights practices that can make obtaining an auto loan through a dealer especially risky. These include working with dealers to manipulate sale prices to hide the true cost of credit, making loans without regard to the borrower’s ability to repay and creating incentives for dealers to tack additional financial products onto car loans. See details at ConsumerFinance.gov.
8. Mortgage rates rise at the start of the new year
Mortgage rates started 2023 by continuing the upward trend of the prior year. 30-year mortgage rates rose by 6 basis points, to 6.48%. This was their second consecutive weekly increase. 15-year rates also rose last week. See rate details at FreddieMac.com.
9. Job growth slows but remains solid
The U.S. economy added a net total of 223,000 jobs in December. That’s a decent number, but represents the fourth consecutive month in which employment growth slowed. A slower but still-growing job market might represent a happy medium. It shows the economy is still growing, but not at a fast enough pace to add more heat to inflation. See full employment situation release at BLS.gov.