(Image source: Wikimedia Commons)

BY STEVEN SPARKMAN

The jobs report for August wasn’t exactly great news, but it did help reduce fear of a double-dip recession for the U.S. economy. But another report came out Friday that has economists scratching their heads.

Rick Santelli: “We saw August consumer credit took an unexpected nose dive, down $9.5 billion. That’s the biggest drop in over a year, and if you look at non-revolving credit -- things like car loans, student loans -- they were down the most in over three years since the summer of ‘08.”
(Video source: CNBC)

Economists surveyed by Bloomberg had predicted an $8 billion gain in August, meaning this huge drop was essentially unexpected. A writer for MarketWatch breaks the $9.5 billion figure down further.

“Both categories of credit declined in the month. The non-revolving category such as auto loans, personal loans, and student loans fell $7.2 billion or 5.2% in August. Revolving credit, which tracks credit-card debt, fell $2.3 billion or 3.5% in the month.”

Analysts scrambled to find something to blame for the drop -- the debt ceiling debate, stock market volatility, the European banking crisis. But a writer for Bloomberg says, American consumers are just playing it safe.

“Decreasing credit shows American households are either continuing to pay down debt or lack the confidence to boost spending on non-essential goods. A thawing of credit and a faster pace of purchases may require bigger gains in income and payrolls.”

The amount of debt held by households is down 8.6% from its high in the Fall of 2008. A writer for Fox Business says, that may be a smart move for individual households, but taken all together it’s a troubling sign.

“When spending dwindles so does demand. And then hiring. And ultimately the recovery. … While it’s good that consumers are paying down their debt, the money that’s being earmarked for mortgages, credit card payments and student loans is money that’s not being spent at Target or at the local hardware store.”