Latest Credit Data Signals a Reset and Resilience

However, a trio of data reports this week reflects a degree of financial discipline, with households adapting their cross-borrowing behavior and expectations. Resilience seems to be the order of the day.

Consumer credit figures from the Federal Reserve show borrowing continuing to expand, although at a slower pace, while Federal Reserve Bank of New York survey data point to rising caution tied to job security and affordability. Meanwhile, the latest employment situation report from the U.S. Bureau of Labor Statistics underscores why those concerns are surfacing, with hiring momentum fading into year-end even as wages continue to rise.

Together, the three datasets suggest consumers are becoming more selective, more intentional and more risk-aware—not disengaged.

Credit Growth Slows as Households Reprioritize

Total consumer credit outstanding rose at a seasonally adjusted annual rate of 1% in November, down from 2.2% in October, bringing outstanding balances to $5.1 trillion, the Fed said Thursday (Jan. 8). The deceleration reflects a meaningful shift in how credit is being used rather than a collapse in demand.

Revolving credit declined at an annualized rate of 1.9%, with balances slipping to $1.3 trillion. The pullback follows months of volatility and comes amid credit card APRs hovering above 20%. For consumers, that pricing environment appears to be driving more active balance management and selective usage, particularly as uncertainty around income and employment increases.

By contrast, nonrevolving credit expanded at a 2% annual rate, lifting outstanding balances to $3.8 trillion. Growth was driven largely by student and auto lending, although at a pace below the surge seen earlier in the post-pandemic recovery. The divergence highlights a consumer who is still financing longer-term needs and essential purchases, while exercising greater restraint on short-term, high-cost liquidity tools.

Sentiment Softens, Driven by Jobs and Income Concerns

Consumer expectations data from the New York Fed, released Thursday, helps explain the behavioral shift amid new lows in sentiment. In December, the median one-year-ahead inflation expectation rose to 3.4%, the highest since April. It was above 3% throughout 2025. For households earning $50,000 or less, expected inflation climbed to 3.7%, reinforcing ongoing pressure on budgets.

At the same time, expectations for income growth are weakening. Median expected earnings growth slipped to 2.5% for the year ahead, down from November and below early-2025 levels. Low-income respondents were the most pessimistic, with expected earnings growth of just 1%.

Job security concerns are increasingly central to consumer sentiment. The mean probability of losing one’s job rose to 15.2% in December, the highest reading since March 2024, while the perceived probability of finding a new job within three months if displaced fell to 43.1%. That figure is more than 10 percentage points below its October 2024 peak and has declined in seven of the past 12 months.

Despite these pressures, sentiment is mixed rather than uniformly negative. About 36.4% of respondents said their financial situation was worse than a year earlier, above the 2025 average, while nearly one-third still expect improvement in 2026. Consumers are concerned, but not capitulating.

The December employment situation report, released Friday (Jan. 9), provides the macro context underpinning those expectations. U.S. employers added just 50,000 jobs in December, down from 56,000 in November and following a contraction of more than 173,000 jobs in October. The fourth quarter closed weaker than earlier in 2025, when quarterly job gains exceeded 300,000.

The unemployment rate edged down slightly to 4.4% but remains 0.3 percentage points higher than a year earlier and above any December reading since the pandemic. Job growth remained concentrated in healthcare and food services, while retail trade shed 25,000 jobs and federal employment continued to decline.

Importantly, wage growth remains intact. Average hourly earnings rose 0.3% in December to $37.02 and were up 3.8% year over year. With inflation running below that pace, as the Consumer Price Index rose 2.7% over the past 12 months in November, real wage gains are still positive, providing a stabilizing force even as hiring slows.

Credit Stress Signals Reflect Awareness, Not Breakdown

One area drawing attention is the rising concern around delinquency. The New York Fed survey shows that the mean probability of missing a minimum debt payment over the next three months climbed to 15.3%, the highest in more than five years.

These concerns are rising, and, at the same time, revolving balances are declining. That pattern suggests households are responding to risk signals by adjusting behavior, paying down balances, limiting exposure and prioritizing flexibility.