For charge-offs and unemployment rates, a perfect storm

Today we've learned of yet another unhappy achievement for credit-card issuers, no thanks to Reuters and USA Today. (Not that we're blaming the messenger.) Credit-card charge-offs reached their 20-year peak in February, at a dizzying 8.82%, according to Moody's Credit Card Index. That's a rate of uncollectible debt a full 3% higher than it was a year earlier.

For cardholders who can't pay off the debts they've racked up, maybe it's comforting to see more Americans trapped in the same downpour with a leaky umbrella. But as the banks continue to dismiss more of their cardholders' debts as uncollectible, our already troubled economy -- ever reliant on our collective consumption -- remains stuck in its queasy spiral.And maybe it's no surprise that the national unemployment rate mirrors the write-off rate. Unemployment is still rocketing past its dizzying 8.1% rate, reached in February -- a level that spent the past 12 months ballooning from 4.8%. (Today, it's hard to imagine the heady springtime of 1953, when our humming economic machinery lulled unemployment to sleep at a beautiful 2.5%.) Moody's predicts that both write-offs and unemployment will reach into the double digits by the middle of next year. Hopefully, the waters won't crest any higher.

As many economists have predicted it would, the credit-card crunch follows the bigger crunch of subprime mortgages (and prime mortgages) that came before it. And there's a sad logic to this notion: For strapped consumers, especially those who've just lost their income, a choice between paying off the credit cards and keeping the roof overhead really isn't a choice at all. And unfortunately, the forecasts on both fronts call for increasing T-storms into 2010.
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