According to the Flow of Funds Report by the Federal Reserve, the credit-related transactions in non-traditional financial industries went up by $2.5 trillion in three months. This is, by far, the highest figure gained in the last five years. A prominent economist says that this growth supports the overall increase in debt across all sectors, including the government, businesses and households.
More credit transactions, more jobs
Economy analysts say that the increase of demands for people working in credit and finance firms has good implications. The credit expansion generates more jobs for the Americans.
In February, the Labor Department recorded a 1.7 percent increase in the number of workers in credit-related firms that employ people to process transactions for bad credit loans, mortgages and credit cards. This means there are currently 2.6 million jobs generated in this industry – the highest in the last four years.
Credit surge boosts economy growth
Chicago-based BMO Private Bank’s chief investment officer, Jack Albin, describes the credit growth as very encouraging considering the fact that the economic activity has been tied with credit expansion in the last 30 years.
Analysts further explain that many lenders are now more accommodating to businesses requiring loans. In fact, this segment is responsible for the 42 percent of economic growth during the fourth quarter of 2012. Meanwhile, loans, credit cards and mortgages, otherwise referred to as household borrowing, account for 12 percent of new transactions in the same period. However, it is still relatively lower as compared to the 2007 fourth quarter’s 27 percent or the time prior to the great recession.
Positive outlook for U.S. economy
Economy analysts also say that the home mortgages sector will most likely need additional people for credit intermediation in the coming months. The home mortgage sector was the most seriously injured sector during the recession.
It could be remembered that banks hired a lot of people to work during the time when the housing market was booming. When the economy went sloppy, most of their departments were downsized leading to massive job losses.
With the housing market in the recovery process, banks are again aggressively offering loans to consumers as there are a lot of mortgages to be processed.