The recent spate of economic data has finally begun to discourage all the "green shoots" believers that had bought into the idea that we were headed for a nice second-half recovery. The number of Americans filing for unemployment benefits unexpectedly rose by 15,000 to 627,000 with continuing claims climbing by 29,000 to 6.74 million. First quarter GDP was revised to a negative 5.5% from 5.7%, which was spurred by a slightly smaller trade deficit. According to the Moody's Credit Card Index, losses on credit cards rose beyond 10% of total loans outstanding in May, a new 20-year high and the sixth consecutive monthly record. Moody's expects charge-offs to peak at around 12% in the second quarter of 2010. Calculated Risk notes that Chase increased its monthly minimum payments from 2% to 5%, thus squeezing consumers further and ensuring that charge-offs continue to rise. Rising unemployment + negative home equity = zero ability to pay off credit cards.
Not to be outdone by the poor,working (now unemployed) sods that rely on credit card debt to stay afloat, the FT reports that even the ranks of the super-rich and merely rich have thinned considerably in the past year. According to the latest World Wealth Report produced by Merrill Lynch, who should know this stuff well as it had certainly contributed mightily to the shrinking of wealth last year, those with $30 million or more to invest collectively lost 24% or their wealth and saw roughly 25% of their super-rich friends leave the list. The population of those worth $1 million or more shrunk by 15% and suffered a 19.5% decline in their wealth. Last year's decimation took rich people back to wealth levels last seen since 2005, which actually is not such a bad outcome in the grand scheme of things. Still, it seems few have escaped the brutal economic downturn unscathed.
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