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When the Music Stops: Slowing Wage Growth May Lead to More Delinquent Debt

Author

Listed:
  • Jason Brown
  • Colton Tousey

Abstract

Subprime auto debt has risen nearly 10 percent above pre-pandemic levels, and delinquency rates have increased despite high wage growth in the economy. Historically, high wage growth has been associated with lower transitions into delinquency. Should wage growth slow, delinquency rates would likely rise even higher, especially among subprime borrowers.

Suggested Citation

  • Jason Brown & Colton Tousey, 2023. "When the Music Stops: Slowing Wage Growth May Lead to More Delinquent Debt," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, March.
  • Handle: RePEc:fip:fedkeb:95932
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    File URL: https://www.kansascityfed.org/Economic%20Bulletin/documents/9422/EconomicBulletin23BrownTousey0324.pdf
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    More about this item

    Keywords

    wages; consumer debts; behavioral economics;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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