Consumers have put the chill on credit card usage in April after a monstrous surge in March.  Still, the pace of credit card usage is increasing and swiftly heading back to all-time high levels. This trend is setting off alarms for many, especially when it’s coupled with delinquency rates edging higher. Yet at the current pace, it would be unlikely that we’d eclipse the old record until the very end of the year.

However, I say that it’s too early to hit the panic button for a number of reasons.

People are more disciplined with their spending. Consider the debt-to-disposable income; it peaked at 23.4% in April 2004, and tumbled all the way down to 17.7% in December 2012 as consumers were still licking their economic wounds.  At the current 18.9% ratio, it’s a long way from being outrageous or a red flag unless you’re at the Fed or the incumbent political party looking for consumers to step up to the plate.

Debt to Disposable Income
23.4%	April 2004
17.7%	December 2012
18.9%	May 2016

The lingering fear that’s kept consumers from going nuts with their credit card has also cast a dark shadow over the rally.  Everyone is either a critic or a skeptic; some are even betting against it, including the infamous trader George Soros; the man who once crushed the British Pound is now looking for stocks to get hammered.

He joins a long list of high-profile bears, but the good news is that these folks often make bets that take years to work out and sometimes those bets flop.

Even though the market finished off the lows of the session, the only winning sectors were utilities and consumer staples.

Defensive Cover	Today	YTD
Utilities XLU	+0.86%	+16.2%
Consumer staples	+0.39%	+6.7%

 

There is no need to panic even if the Lords of Wall Street are trying to get you to head for the hills.

The Vanishing American Man

He's a hardhat, hammer swiggin', won't hear him whine
Kick some butt, wrap it up, crack a beer, high five
God fearing son of pride and strength
That's exactly what he's turned into

He'll fight tooth and nail for his family
Give the shirt right off his back for a friend in need

-American Man by Trace Adkins

These headlines have become common over the years…

The Slow Disappearance of the American Working Man 

Bloomberg, Aug 25, 2011

America's jobless men: Decline of the working man

The Economist, Apr 28, 2011

The Vanishing Male Worker: How America Fell Behind

New York Times, Dec 12, 2014

The Mysterious Rise of the Non-Working Man

The Atlantic, Dec 15, 2014

Well, the ‘Decline of the American Working Man’ has moved into hyperdrive.

Despite all the hype about women getting the short end of the stick in the economy, the fact is that the American male worker has seen his paycheck stall in the past 40 years; more and more men are giving up on being the breadwinner or working at all.

Men have earned less adjusted for inflation now than the average income in 1973, whereas women have seen a 30% increase in their average wage.

Consequently, the multi-decade trend of men dropping out of the workforce has gotten worse since the Great Recession, particularly among white men.

Decline in Participation:

• Men -5.7%
• Women – 4.5%
• White Men 6.0%

There is no doubt this trend has political ramifications, but the big question is whether this issue can even be fixed?

Moreover, I must admit that it doesn’t look great at the moment.

Today’s Session

 

Negative talk and continued failure at key resistance is triggering more selling this morning.  It’s not the stuff of panic, but it is worrisome.

For the S&P 500, it’s important that 2,100 holds.   If that doesn’t happen, look for the index to drift to its 50-day moving average of 2,068; from there, it must hold above 2,050.

S&P 500

Comments

You have just defined what may be the game changer in the next election - the base of Trumps support. Everyone in the press keeps talking about Trumps negatives with women, but no one is talking about Clinton's much larger negative with men! Ray Weldon on 6/10/2016 10:00:32 AM

Maybe people are doing what I've been doing for the past 4 years, which is have my cards paid off, but use them for everything (no debit card use), pay my bills in full each month, and get the credit card co's to pay me for a change with their cash back bonuses, which I use for account credit (not more shopping). Do these credit card stats give that kind of information on how they're used or is it only looking at use/debt? T.Jay on 6/10/2016 10:31:32 AM

With so MANY people out of work, your audience must be made up of people who just want to see how the 1% live, what they do with their money, and mostly to see a fine young man like yourself articulate what could be IF we all felt comfortable enough to participate. Barry Gold on 6/10/2016 10:55:48 AM

I'm in the same boat as T.Jay but remember that it is the retailers that are paying the bonuses, not the credit card company! mike on 6/10/2016 12:06:07 PM

I need a clear definition of "disposable income". Robert McEver on 6/10/2016 12:26:37 PM

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