THE TICKER

Solid consumer spending has helped power the U.S. economy through rocky conditions this year, as the sugar high from tax cuts faded and businesses hunkered down in the face of trade-war uncertainty and new threats to global growth. But a surge in personal loans is raising alarm about whether consumers can keep it going. 

Personal loans are up more than 10 percent from a year ago, "a rapid pace of growth that has not been seen on a sustained basis since shortly before the Great Recession,” my colleague Heather Long writes. “All three of the major consumer credit agencies — Equifax, Experian and TransUnion — report double-digit growth in this market in recent months.”

The phenomenon is the latest warning signal from a slowing economy as the election year swings into view. Fears of a recession next year have faded in recent months, but some prominent voices are noting the outlook remains cloudy. “I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” former Federal Reserve Chair Janet Yellen said at the World Business Forum in New York.

The numbers tell the story: 

  • More than 20 million Americans have taken out personal loans, more than double the number in 2012, according to TransUnion. 
  • Personal loan balances over $30,000 have leaped 15 percent over the past five years, according to Experian. 
  • The average loan balance is more than $16,000, similar to credit card debt, per Experian. 

And the total outstanding personal loan balance is now approaching its pre-recession level: 

It’s not entirely clear what’s driving the surge in the loans, especially since economic growth broadly continues chugging, if at a slower pace, and wages are rising. One possible explanation, via Heather, is the profusion of Web-based services that have made it much easier for consumers to secure the credit without stepping foot in a brick-and-mortar bank. “FinTech companies now account for nearly 40 percent of personal loan balances, up from just 5 percent in 2013, according to TransUnion,” she notes. 

And while these unsecured loans make up only a tiny fraction of all personal debt, their growth is contributing to record levels of overall borrowing. Americans now owe $13.95 trillion, or $1.3 trillion more than they did at the previous debt peak in 2008, according to figures from the New York Fed. The number has been rising steadily for five years, now standing 25 percent higher than it did at its post-recession low in 2013. 

More expensive cars, for example, have drivers taking out longer-term loans to buy them and, in rising numbers, owing more than their autos are worth. “Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon — referred to as negative equity, or being underwater — can leave car owners trapped,” the Wall Street Journal’s AnnaMaria Andriotis and Ben Eisen reported recently. “Some 33% of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28% five years ago and 19% a decade ago, according to car-shopping site Edmunds.”

Nevertheless, the spending that has sustained the record-length economic expansion looks primed to continue. “Sentiment in the U.S. rose more than expected this month as consumers grew slightly more confident about the economy, according to preliminary data released Friday by the University of Michigan,” CNBC’s Yun Li reported earlier this month. “The early November read on consumer sentiment rose to 95.7 from 95.5 in October, the university’s Surveys of Consumers data showed.” The survey’s final reading for this month is coming today. Meanwhile, retailers expect a strong holiday shopping season. 

“Year to date, through November 18, the amount of money spent by our consumers is about $2.5 trillion, and that’s up 5.8 percent over last year in the same time frame,” Bank of America CEO Brian Moynihan said during an interview at a Washington Post Live event. “And it’s been consistently rising a little bit during the year, especially in the second and third quarter and into this quarter, so that bodes well.” 

One potential tripwire: U.S. and Chinese negotiators have so far failed to reach an agreement on a trade deal to forestall a major escalation in tariffs on Chinese imports set to hit on Dec. 15 that would heavily fall on consumer goods. More on that below. 

MARKET MOVERS

Bridgewater bets on market drop. WSJ's Juliet Chung and Gunjan Banerji: "Bridgewater Associates LP has bet more than $1 billion that stock markets around the world will fall by March, said people familiar with the matter. The wager, assembled over a span of months and executed by a handful of Wall Street firms, including Goldman Sachs Group Inc. and Morgan Stanley, would pay off for the world’s biggest hedge fund if either the S&P 500 or the Euro Stoxx 50—or both—declines, some of the people said.

"It is made up of put options, which are contracts that give investors the right to sell stocks at a specific price, known as a strike, by a certain date. They allow investors to shell out a relatively small amount of cash to hedge a larger portfolio or make a directional wager. The options expire in March and currently represent one of the largest bearish bets against the market."

Stocks fall for third straight day. CNBC's Fred Imbert: "Stocks slipped on Thursday as investors digested the latest reports surrounding the U.S.-China trade war. The Dow Jones Industrial Average was down 54.8 points, or 0.2% at 27,766.29. The S&P 500 dipped 0.16% to 3,103.54 while the Nasdaq Composite pulled back 0.2% to 8,506.21. Thursday marked the third straight day of losses for the Dow, its longest losing streak since August. The S&P 500 posted its first three-day slide since September."

Sales of higher-priced homes picked up last month, but those involving starter homes and others aimed at lower- and middle-income buyers were slowed by a lack of inventory.
WSJ
“I don’t see any reference to independence in the legislation that has defined the role of the Federal Reserve for the United States,” Shelton said recently.
Bloomberg

TRUMP TRACKER

TRADE FLY-AROUND:

U.S. Chamber: December tariffs could hit before phase-one trade deal wraps. CNBC's Sahel Roy Choudhury: "The U.S. and China may not be able to lock down a firm 'phase one' deal before the next tariff deadline in mid-December, according to a senior executive at the U.S. Chamber of Commerce. A deal is would be seen as a step in de-escalating trade tensions between the world’s two largest economies. 

But some of that enthusiasm has dissipated since Chinese Vice Premier Liu He’s Washington visit in October, said Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce. Liu is also the chief trade negotiator for China. 'I explained to (Liu He), "you’re going to have to have some give-and-take here." China has to bring more to the table in the final package,' said Brilliant told CNBC’s 'Squawk Box' on Friday."

White House won't say if Trump will sign Hong Kong bill. NYT's Michael Crowley and Ana Swanson: "On Wednesday, Congress put Mr. Trump on the spot, sending him tough legislation that would impose sanctions on Chinese officials for cracking down on the protesters and could end Hong Kong’s favored economic relationship with the United States... The White House declined to comment on whether Mr. Trump would sign the measure, which passed the Senate unanimously and the House with only one lawmaker opposed, creating a solidly veto-proof majority. Presidents have 10 days to sign approved legislation, but that clock is suspended when Congress is adjourned, as it will be next week for the Thanksgiving holiday."

— Senators urge Trump to halt Huawei license approvals:A bipartisan group of 15 U.S. senators urged the Commerce Department to suspend issuing licenses to U.S. firms that conduct business with China’s Huawei Technologies Co, saying it could threaten U.S. security,” Reuters’s David Shepardson reports.

In a letter to Trump, “the senators said the administration should halt issuing licenses until the administration provides Congress ‘a report outlining specific criteria for determining whether or not the approval of any license poses a national security threat’ … The letter warned the licenses will allow ‘Huawei to continue to pose a serious threat to U.S. telecommunications infrastructure and national security more broadly.’”

  • Who signed on: Republican Sens. Tom Cotton (Ark.), Ben Sasse (Neb.), John Cornyn (Tex.), Josh Hawley (Mo.) and Rick Scott (Fla.) and Democrats Chuck Schumer (N.Y.) Elizabeth Warren (Mass.), Richard Blumenthal (Conn.), Ron Wyden (Ore.) and Cory Booker (N.J.).

— No USMCA deal yet: “House Speaker Nancy Pelosi said … that she doubts Congress has enough time left to pass the USMCA this year, but Democrats and the Trump administration will continue talks next week to work out a compromise on remaining issues,” Politico’s Sabrina Rodríguez reports.

“U.S. Trade Representative Robert Lighthizer met with Pelosi and House Ways and Means Chairman Richard Neal (D-Mass.) midday to discuss the last sticking points of the deal. Democrats want President Donald Trump’s trade chief to deliver on stronger enforcement mechanisms in the USMCA before a House vote is held. But lawmakers emerged without any announcement.”

TRUMP WATCH:

— Trump said he opened a Mac factory … that’s been operational since 2013: “While Washington was aflame with some of the most dramatic testimony of the ongoing impeachment inquiry on Wednesday, [Trump] was in Austin taking credit for the launch of a Mac factory that opened three years before his election,” my colleague Rachel Siegel reports.

“Standing on the floor of Apple’s Mac Pro facility, Trump said, ‘We’re seeing the beginning of a very powerful and important plant.’ He later tweeted that he himself opened ‘a major Apple Manufacturing plant in Texas that will bring high paying jobs back to America.’ Treasury Secretary Steven Mnuchin and Ivanka Trump joined him on the tour. But Apple has been assembling computers in Austin since 2013, at a plant that’s owned by Flex, one of its contractors. Trump made his remarks as the company’s chief executive, Tim Cook, stood by without setting the president straight.”

— Bevin’s stay could hurt Trump legally: “When Kentucky Gov. Matt Bevin came to Washington in January for two nights — one of many visits the Republican had made to the nation’s capital — he stayed at President Trump’s D.C. hotel. Kentucky taxpayers initially footed the $686 bill, records obtained by The Washington Post show,” my colleagues Jonathan O'Connell and David A. Fahrenthold report.

“Although Kentucky’s Republican Party reimbursed the state for Bevin’s stay two months later, the transaction may still run afoul of an anti-corruption provision of the Constitution barring the president from receiving any ‘emoluments,’ or payments, from the states, legal experts say.”

IMPEACHMENT MINUTE:  A speed read on the latest from the congressional impeachment inquiry.

 

"With a warning on Russia, blitz of public testimony in impeachment inquiry comes to an end." By The Post's Karoun Demirjian, Elise Viebeck, Rosalind S. Helderman and Matt Zapotosky

"Hill said she told Sondland that his efforts in Ukraine would ‘blow up.'" By The Post's Felicia Sonmez, John Wagner and Colby Itkowitz 

"White House and Republicans discuss limiting impeachment trial to two weeks." By The Post's  Seung Min Kim and Josh Dawsey 

"‘The picture has been painted’: Hearings unite Democrats behind impeachment." By The Post's  Mike DeBonis and Rachael Bade 

POCKET CHANGE

— WeWork announces massive layoffs: “Troubled office-space startup WeWork said it would shed around 2,400 jobs following its botched initial public offering in an effort to reduce mounting losses,” the Wall Street Journal’s Sarah E. Needleman and Eliot Brown report.

“We Co., as its parent company is formally known, said … that the layoffs are necessary to create a more efficient organization. The job cuts, which represent about 17 percent of its workforce, began around the globe weeks ago and spread this week to employees in the U.S., the company said.”

— Schwab to buy TD Ameritrade: “First, Charles Schwab Corp. upended the retail brokerage business by cutting commissions to zero. Now, it’s seizing on the turmoil it unleashed to acquire one of its biggest rivals, TD Ameritrade Holding Corp,” Bloomberg’s Annie Massa and Matthew Monks report.

“Just weeks after Schwab stunned competitors by letting customers trade stocks for free, the company is moving to tighten its grip on the industry with talks to acquire TD Ameritrade, according to a person familiar with the matter. The deal would give Schwab, America’s original discount broker, even more sway over the industry it pioneered nearly a half-century ago -- and an edge in the intensifying battle for ordinary investors’ dollars, and the investment adviser business. The tie-up would result in a $5 trillion titan, but analysts say it could attract antitrust scrutiny.”

— Mortgage rates fall: “Trade discussions between the United States and China continue to have an outsize influence on mortgage rates,” my colleague Kathy Orton reports.

“According to the latest data released by Freddie Mac, the 30-year fixed-rate average fell to its lowest level in six weeks, declining to 3.66 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.75 percent a week ago and 4.81 percent a year ago.”

— Exxon aims to sell $25 billion of assets: “Exxon Mobil plans to sell up to $25 billion of oil and gas fields in Europe, Asia and Africa in its biggest asset sales for decades, seeking to free up cash to focus on a handful of mega-projects, according to three banking sources,” Reuters’s Ron Bousso and Shadia Nasralla report.

“The sell-off would be a marked acceleration of the U.S. oil major’s previous divestment plans. It would represent an ambitious attempt by Chief Executive Darren Woods to catch up with competitors who carried out sweeping portfolio reviews and sold swathes of assets following the 2014 market crash.”

MONEY ON THE HILL

— Trump signs CR, averts shutdown for now: “Trump signed a short-term spending bill to keep the government open through late December, staving off a shutdown that would have begun at midnight,” my colleague Erica Werner report.

“Trump’s signature on the stopgap spending bill came following Senate passage of the legislation on a bipartisan 74-to-20 vote. The House passed it earlier in the week in the midst of public impeachment hearings. Without the legislation, government funding would have expired Thursday at midnight, forcing multiple agencies to begin to close down operations and send federal workers home. The bill extends government funding through Dec. 20, setting up a fight over money for Trump’s border wall that could happen around the same time the House is voting on articles of impeachment against the president.

— Pot stocks soar after House hearing: “Shares of marijuana companies rose … after a U.S. congressional committee passed a legislation to decriminalize cannabis, taking it a step closer to being approved by the Democratic-controlled House of Representatives,” Reuters’s Shanti S Nair reports.

“The bill, which was passed 24 to 10 in the House Judiciary Committee on Wednesday, sent shares of Canopy Growth, Aurora Cannabi, Aphria Inc and Tilray Inc up between 8 percent and 15 percent … The approval comes two months after the House passed a bill to advance legislation that would allow banks to provide services to cannabis companies in states where it is legal.The latest bill, which has more than 50 co-sponsors, enables states to set their own policies while allowing to expunge federal marijuana convictions and arrests.”

— It’s official, Bloomberg is running: “Former New York mayor Mike Bloomberg filed federal papers declaring himself a Democratic candidate for president, a potentially disruptive move that could upend the party’s nomination fight this spring,” my colleague Michael Scherer reports.

“The filing, coming just eight months after Bloomberg ruled out a bid because he believed it would be too hard to win the Democratic nomination, reflects his view that the field of Democratic contenders was not well positioned to win next year and that a candidate with his experience, political moderation and deep pockets would have a better chance of defeating [Trump] in a general election.”

DAYBOOK

Today:

  • Foot Locker, Buckle and J.M. Smucker are among the notable companies reporting their earnings, per Kiplinger

THE FUNNIES

From The Post Tom Toles:

BULL SESSION