Business & Real Estate

Bah humbug: Holiday hangover of rising credit card debt, store closings

Credit analysts say consumer credit delinquencies are rising in 2018, a year when interest rates also are expected to climb. “Simply put, there's only so much credit card debt Americans can absorb without it causing real problems,” said one analyst. In this March 5, 2012, file photo, consumer credit cards are posed in North Andover, Mass.
Credit analysts say consumer credit delinquencies are rising in 2018, a year when interest rates also are expected to climb. “Simply put, there's only so much credit card debt Americans can absorb without it causing real problems,” said one analyst. In this March 5, 2012, file photo, consumer credit cards are posed in North Andover, Mass. AP

The check has arrived for what retail experts and economists have called a fairly prosperous holiday shopping season, when consumers opened their wallets and spent liberally.

Alas, the post-holiday hangover has been peppered with bad news.

Despite year-over-year improvements in consumer spending at its stores, Macy’s opened January with an announcement that it will implement 11 store closings in 2018, four of them in California.

Old-school retail heavyweights Sears and Kmart also started the new year with store-closing announcements: 64 Kmarts nationwide (five in California) and 39 Sears stores (six in California).

“This has been the pattern for a few years: brick-and-mortar retail store closings at the end of the holidays,” said Peter Schaub, a New York-based branding and marketing expert. “In the current environment of increased online consumer shopping – especially during the holidays – it’s a pattern I think you can expect to repeat itself for years until the mix of online (sites) and brick-and-mortar stores reaches some kind of ideal balance.”

Another pattern, less surprising, was the spike in seasonal jobs, followed by an equally dramatic employment plunge once the holiday shopping season was wrapping up.

The National Retail Federation said earlier this month that retail industry employment nationwide decreased by 20,200 jobs from November to December, offsetting the surge of 20,500 jobs reported from October to November.

For some retail analysts, the wild swings in seasonal employment and post-holiday season store closures are business as usual.

“Retail has always been the Wild West, with constant store fluctuations and seasonal hiring spikes dating back to the 1950s,” said Bay Area consultant Jennifer Ryan. “I think it’s more noticeable now because of the shifts that have occurred in online retail.”

Other analysts are more alarmed, for reasons that go beyond seasonal hiring and the sorting out of brick-and-mortar stores. Some wonder how much more debt U.S. consumers can amass.

Statistics released last week by the Federal Reserve showed U.S. credit card debt hitting an all-time high of $1.02 trillion in November, the traditional starting month for holiday shopping.

“This record should serve as a wake-up call to American consumers to make 2018 the year they get their credit card debt under control. It’s especially important because we expect interest rates to keep rising this year, which means that your debt will only grow faster and faster unless you take action,” said Matt Schulz, senior industry analyst at CreditCards.com, the credit card information site based in Austin, Texas.

Schulz added: “Simply put, there’s only so much credit card debt Americans can absorb without it causing real problems. Right now, delinquencies are still fairly low, but they’re climbing. A mix of increased card debt and higher interest rates means that climb will probably accelerate in 2018. That could mean big trouble for many Americans.”

The Federal Reserve also reported that U.S. consumers ran up nearly $28 billion in new debt in November. That includes not only credit cards, but student, auto and other kinds of loans. It does not include home mortgages and home equity loans.

Total U.S. debt for November came in at $3.83 trillion, which some called a sign of confidence in the economy but others considered a red flag for some U.S. households overextending their finances.

At Sacramento-area shopping malls, a random sampling of consumers seemed unconcerned about their holiday spending and debt.

“Yes, we did spend more this year, but we didn’t go overboard,” said Rebecca Gordon, a 40-year-old Sacramento homemaker looking for post-holiday deals at Arden Fair mall. “We’ll probably pay off what we spent by spring … and it was nice to share Christmas beyond our home.”

At Westfield Galleria at Roseville, 51-year-old Deb Smith was shopping with a group of Roseville friends and “wishing I could have taken advantage of some of these deals right before Christmas. I would have spent even more, and this year … we did spend a bundle.”

Other shoppers were more cautious.

“I already promised myself that I will not spend as much at Christmas this year (2018) as I did last year,” said Carmichael resident Pat Chamberlain, a 37-year-old restaurant worker shopping at Sunrise Mall in Citrus Heights. “I did kind of overdo it … I don’t think (retail stores) understand that you can only dip into that credit card so many times before you have to stop.”

Mark Glover: 916-321-1184, @markhglover

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