- The economy is still struggling, but Americans’ credit scores have climbed to record highs. This has been largely due to the unprecedented amount of financial assistance that came out of the CARES Act, which helped millions of people keep up with bills and pay down debt. (The Wall Street Journal)
- NH: Since the pandemic began, Americans' credit scores have been on the rise. In July 2019, the average FICO credit score was just 706. In July 2020, the average score rose to 711 (the latest score available). That's the highest average score since 2005, when FICO first started keeping track.
- What's going on? Unprecedented government stimulus. Nothing like $3 trillion in federal debt (quickly spent in payments to businesses and households) plus $3 trillion added to the Fed's balance sheet (to keep interest rates row and borrowers comfortable) to make most American households feeling pretty good about how they're doing right now. Lockdowns also meant that people have been shopping less and have had fewer opportunities to acquire debt. Banks have held off on going after most delinquent mortgagors.
- Over the last 8 months, real disposable personal income is way up even though aggregate weekly hours worked remains way down. By the end of this year, 2020 will weigh in with the highest annual personal savings rate since World War II. What's not to like about this scenario? Most households are awash in unprecedented liquidity. Credit scores, not surprisingly, are drifting higher.
- But there is a dark side to all this good news. Namely this: It cannot last, and most Americans know it.
- Back in June and July, I wrote about several surveys showing that Americans report being more anxious and unhappy--and more pessimistic about their country's future--than they've been in the past 50 years. (See "America Is Registering Record Levels of Unhappiness" and "Americans More Pessimistic About Future of Pandemic.") Even so, Americans are more satisfied than ever with their "current financial situation."
- Let's be sure to emphasize the word "current." No matter how things are going right now, most Americans know that this extraordinary debt party can't continue indefinitely and are worried about what will come after. Now that stimulus is tapering off, maybe what comes after is already arriving. We'll see when the October and November credit score are finally published.
- According to Gallup, a larger share of Americans now say they are "better off financially than they were four years ago" (the famous question asked in 1980 by Ronald Reagan) than in any presidential election year since 1984. That ought to be giving President Trump a big boost in the polls.
- And yet it's not, mainly because most voters don't think it's sustainable--or because they don't attribute the boost to Trump's policies, or because they can't connect this good news with a positive vision of the country's future. Maybe, in other words, they have worries that feel even more pressing than their own immediate economic situation.