Economic pessimists seized on new data indicating an increase in car loan delinquencies as evidence of a looming recession, but a downturn is likely simply because of the economy’s cyclical nature.

LULU GARCIA-NAVARRO, HOST:

The economy is rocking right along. Unemployment is low at 4 percent, and we learned this week of a record number of job openings. But this week, we also got some data on car loans. The number of Americans seriously delinquent on them reached a new high. So let’s turn to NPR’s Danielle Kurtzleben for what that all means.

Hey, Danielle.

DANIELLE KURTZLEBEN, BYLINE: Hey, Lulu.

GARCIA-NAVARRO: All right. Let’s do the numbers.

KURTZLEBEN: All right. So the data that we’re talking about is from the New York Federal Reserve. And that data showed that a record 7 million people are seriously delinquent on their car loans. And by seriously delinquent I mean 90 days or more.

GARCIA-NAVARRO: Wow.

KURTZLEBEN: Yes. That’s the highest level in the 19 years that the New York Fed has even been tracking that.

GARCIA-NAVARRO: Why is that?

KURTZLEBEN: Well, we have a few hints in the data. We don’t know for sure. But delinquencies among people under 30, among young adults, have really climbed. As to what’s behind that, it could be student debt. That has climbed in a huge way in recent years.

GARCIA-NAVARRO: Indeed.

KURTZLEBEN: Aside from that, we’re seeing really high delinquencies among people with low credit scores. There is some indication that people are getting subprime auto loans, and they’re falling delinquent on those. But the bottom line, as the New York Fed pointed out in its report on this, is that this may mean that, even while you have those really good headline numbers of unemployment, that the strong economy isn’t benefiting everybody equally.

GARCIA-NAVARRO: The economy, though, is strong. So if there’s one bad indicator in the middle of that, how much weight should we give it?

KURTZLEBEN: You’re absolutely right, like you said at the top here, that the job market is looking really, really great. And amid all that, yeah. This is just one yellow flag. But that said, this is one yellow flag among several that have been popping up lately. For example, this week, we saw that retail sales fell in December by the largest amount since 2009. Aside from that, jobless claims, people coming forward and saying, hey, I need unemployment insurance – that also went up this week. So, no, this doesn’t mean recession is coming this week, this month, even this year. But it does seem to show that amid this seemingly pretty strong economy, there are some soft spots. And that is worrying.

GARCIA-NAVARRO: And you looked into what tools the government has to fight the next recession. What kind of tools do policymakers actually have?

KURTZLEBEN: Long story short, they have fewer tools or maybe weaker tools than they did before the last recession. I mean, let’s look at the Federal Reserve. A very simple way to think about it is the Fed uses interest rates like an accelerator pedal. It lowers those down when it wants to speed up the economy, right? Except right now that accelerator pedal is pretty close to the floor. Interest rates are already pretty low. The Fed has been raising them very, very slowly since the last recession. We kind of have a hangover there.

Then, you go across Washington to Congress. OK. Congress controls the purse strings, except when you look fiscally, we have higher debt than we had before the last recession for a whole bunch of reasons. Now, economists do differ on how bad debt is for the economy. But either way, it appears there’s less room there. And by the way, look at how much Congress is accomplishing these days. It’s hard to imagine them easily coming to an agreement on what to do if we did have a downturn.

GARCIA-NAVARRO: Downturns are inevitable because, as we’ve seen in economic history, things go up, things go down.

KURTZLEBEN: Most definitely, yeah.

GARCIA-NAVARRO: That is just the nature of the economic system.

KURTZLEBEN: Yeah.

GARCIA-NAVARRO: President Trump likes to talk about how strong the economy is right now. So if there’s a downturn, does he get the blame?

KURTZLEBEN: No. I mean, presidents can push policies that can boost the economy. They can potentially flub things that could hurt the economy. But in general, presidents can’t steer it. So you can’t give them full credit or full blame for big economic swings. Aside from that, you have a lot of these Democratic presidential candidates pushing really progressive policies aimed at helping Americans who are hurting economically, so promising better wages, better benefits. You even have some candidates talking about guaranteed jobs. And that’s, you know, a very, very big, sweeping change. So I’m interested in – if we do have a downturn, could that affect how voters feel about those policies? Could that push some voters more progressive?

GARCIA-NAVARRO: That’s NPR’s Danielle Kurtzleben with many good questions. We’ll be watching. Danielle, thanks so much.

KURTZLEBEN: Thanks, Lulu.

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