Consumers Find Credit Trouble in November

Delinquency rose, as well, hitting 6.2% in November, up slightly from 6.1% the month before. Credit card payments that are 30 days to 180 days late are considered to be delinquent, as long as they haven't been written off yet. Delinquencies hit their high point of 6.4% in March.

A ray of light in all this is that the number of people making late payments moved higher, while delinquent balances fell year-over-year for three of the top six credit card issuers. Early-stage delinquencies (30 days to 60 day late) fell slightly to 1.6% in November, from 1.66% in October. The measure is volatile, however, Moody's reports, so the month-over-month improvement may not be indicative of any broader trends among consumers.

In fact, the credit reporting agency expects delinquencies to continue to grow through the winter, with the charge-off rate expected to peak at 12% to 13% by the middle of next year.

This compares interestingly against the ongoing trend of debt repayment this year, which has impeded consumer spending. The opening of shoppers' wallets, of course, accounts for 70% of economic activity in the U.S. and will be instrumental to a recovery.

Through August 2009, consumer debt outstanding had declined for seven months in a row, according to the Federal Reserve, as consumers sought to lower their balances and stabilize household finances. Yet, unemployment continued to increase during this period, impairing their ability to whittle away their balances.

We're looking at the essential struggle of the recession, in which consumers cope with post-credit crisis finances and unemployment while trying to manage household financial obligations without the easy credit crutch they had only two years ago. Given that the eventual recovery is expected to be jobless, we'll need to see a return of household income – regardless of the unemployment rate – before consumer credit will stabilize.