President Trump has said the economy is “setting records on virtually every front.” One of those records is the record seven million Americans at least three months behind on car payments, according to the Federal Reserve Bank of New York.
One of the core myths of the Trump administration is that low unemployment means a booming economy. Workers can be logging hours at multiple jobs and still be homeless. And over half a million government employees weren’t paid for over a month despite their employment.
But the car payments are a major red flag for the economy that Trump assures is “very sustainable.”
“The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market,” wrote an economist with the New York Fed.
The New York Fed reported that there are a million more “troubled borrowers” today than at the height of the recession in 2010.
At the same time, underneath the New York Fed, public transit options are in a literal state of emergency.
As Grit Post has often reported, most Americans live paycheck to paycheck, and few can handle financial emergencies. And because for many Americans cars are essential for getting to work, automotive payments are among the first bills paid.
“Your car loan is your number one priority in terms of payment,” said Michael Taiano of Fitch Ratings. “If you don’t have a car, you can’t get back and forth to work in a lot of areas of the country. A car is usually a higher-priority payment than a home mortgage or rent.”
Yet the “repo” business is doing better than ever because falling three months behind is often when a vehicle gets repossessed.
Millennials and the older members of Gen Z are the largest cohort in this “troubled borrower” group, leading the Fed to suspect that student loan repayments (which make up $1.6 trillion in debt nationwide) are causing pressure on other loan repayments.
Another possible cause is predatory lending practices. While the mortgage market had to rein in its practices following the recession, not all lenders did.
“Predatory lending practices and a lack of real transportation options leave many households trapped in debt with few ways out,” said Faye Park, president of consumer protection watchdog U.S. Public Interest Research Group.
With public transportation a mess nationwide, losing vehicles can mean losing livelihoods, and that’s the position a record seven million “troubled borrowers” currently face. Which could be very bad news for Trump’s “very sustainable” economy boasts.
Katelyn Kivel is a contributing editor and senior legal reporter for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.