More Americans are falling behind on their mortgages and car loans than at any point in the past decade, even as Wall Street celebrates economic growth and an artificial-intelligence stock boom. This is what capitalist expansion looks like from below: wealth piles up for owners while debt tightens its grip on workers.
New data released Tuesday by the Federal Reserve Bank of New York show that the share of borrowers who fell at least 30 days behind on mortgage payments in the second quarter was the highest recorded since 2015. The share of borrowers who became seriously delinquent on car loans, (at least 90 days late,) was the highest in any quarter since 2010.
Most borrowers are still current on their debts, and overall delinquency rates remain well below those seen during the Great Financial Crisis and its immediate aftermath. New York Fed researchers also said the rates, while higher than before the pandemic, are fairly stable. But the health of finance capital and the security of the working class aren’t the same thing. A worker can be in crisis long before missed payments become large enough to threaten a bank.
Bourgeois economists describe the present situation as a “mixed” or “K-shaped” economy. The phrase hides more than it explains. One side of the supposed “K” owns stocks, businesses and interest-bearing assets. The other side lives mainly by selling its labor and borrowing to cover necessities. The divergence isn’t a strange defect in an otherwise healthy system. It’s the normal class structure of capitalism showing up in the data.
“You really do have a lot of people who are doing just fine and spending because they feel good, and they’re secure in their jobs,” Matt Schulz, a consumer finance analyst for LendingTree, told CNN. “But then you have an awful lot of people who are really struggling and really nervous because of high prices and a challenging job market.”
The rise in auto-loan delinquency is especially revealing. Cars aren’t luxuries for millions of workers. They are the means of reaching a job, buying food, taking children to school and carrying out the daily work of keeping a household going.
“It’s no surprise that auto loan delinquencies are creeping higher, but it is still concerning,” Schulz said. “People generally don’t stop paying their auto loan until they’re under real financial pressure. For many Americans, their car is what gets them to work and keeps their daily lives moving.”
Capitalist development has made private transport a condition of employment across much of the country. The worker borrows from a lender to buy a vehicle, pays an insurer to keep it legally on the road and buys fuel to reach the workplace. Once there, the employer takes the value produced above the worker’s wage. Finance capital collects another claim on that wage before it can pay for food, rent or medical care.
Official indicators make the economy look strong. Output is growing, unemployment remains low and enormous investment in artificial intelligence has driven stocks and financial wealth higher. Yet growth under capitalism measures the accumulation of capital, not whether the people who produce society’s wealth can live securely. A stock rally enriches those who already own stock. The technology created by collective labor and accumulated social knowledge appears on the balance sheet as private property.
For workers, five years of unusually high inflation have raised the cost of daily life. Job growth has been sluggish across most industries. The war in Iran has pushed gas prices higher in recent months, allowing inflation to eat further into paychecks.
Imperialism doesn’t stay overseas. The struggle among states and monopolies for power, markets and resources returns home through fuel bills, public spending and disrupted livelihoods. The ruling class conducts its geopolitical contests on a world scale; workers meet the consequences at the gas pump and the grocery checkout.
New York Fed researchers said the figures “still reflects this K-shaped economy,” in which the fortunes of wealthier and poorer households move farther apart.
“There are a lot of households who live paycheck to paycheck, and it just needs like one thing to happen to them that could lead to a delinquency,” the researchers said.
That “one thing” could be a cut in hours, a medical bill, a rent increase or a repair needed to keep a car on the road. The apparent fragility of these households isn’t a personal failure. Wages are set by the needs of capital, while the cost of reproducing working-class life — housing, transport, education, food and health care — is pushed onto workers and their families. Credit bridges the gap for a while, then gives banks a claim on future wages.
Total US household debt appeared to edge down by $13 billion, or 0.1 percent, to $18.8 trillion in the second quarter. Even that small decline was an accounting illusion. Mortgage balances were reported as falling by $74 billion because of a “servicer transfer gap”: when loans moved between servicing companies, some credit reporting was delayed. Fed researchers expect the gap to reverse next quarter.
Without that reporting quirk, mortgage balances would have been flat and total household debt would have risen by $61 billion, or 0.3 percent. Balances increased across the other major categories, including home-equity, student, auto, credit-card and personal debt.
Record nominal debt by itself doesn’t prove that every household is worse off. The figures aren’t adjusted for inflation, the population has grown and higher prices mechanically produce larger loan balances. Those qualifications don’t erase the class content of the numbers. When housing, education and transport are sold as commodities, rising prices turn basic needs into larger claims on workers’ future income.
A record $211 billion in new auto loans appeared on credit reports during the quarter. Car purchases usually rise during tax-refund season, but vehicle prices are also higher than ever, and the loan figures aren’t adjusted for inflation. A lump-sum refund is turned into a down payment, and years of future wages are pledged so a worker can keep getting to work.
Official reports record the process as consumer spending, credit growth and economic expansion. Finance capital records it as an income stream. Workers experience it as another bill that can’t be missed; and, for a growing number, one they can no longer pay on time.
