A commentary by James Carter (Navigators Global) and John Silvia (former Wells Fargo chief economist) contends that U.S. household balance sheets are weakening beneath positive headline indicators. They argue that while the economy is growing, unemployment is low, and inflation has cooled, years of eroded purchasing power have left many families more fragile.
Authors cite worsening delinquencies across major consumer debts
Referencing the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, the authors say credit card, auto loan, and home equity line of credit delinquencies have all increased. They further point to the Federal Reserve’s November 2025 Financial Stability Report, noting it reported credit card delinquencies at their highest level since 2011. According to the commentary, Q1 2026 data show a 13.1% credit card delinquency rate—a 16‑year high.
Purchasing power hit, uneven recovery, and rising debt service
The authors state that from January 2021 to June 2022, nominal wages rose 7.3% while inflation increased 12.3%, amounting to a roughly 5% hit to purchasing power. They say real wages have grown since May 2023 but remain about 2.5% below January 2021 levels. They also assert that household debt service has risen as a share of disposable income, pressuring budgets.
“Two economies”: asset gains vs. wage-dependent households
According to the commentary, households owning stocks, businesses, or appreciating real estate saw sizable gains—citing approximate five‑year total returns of 87% for the S&P 500 and 40% for the Russell 2000—while wage‑dependent households absorbed higher prices and slower purchasing‑power recovery.
Mortgage and age‑group signals
The authors say mortgage origination volumes have “barely improved” for borrowers below a 650 credit score, while those in the 660–719 range have seen meaningful improvement, suggesting weaker households remain on the sidelines. They add that auto loan delinquencies among 40‑ to 49‑year‑olds rose from 2023 through 2025 and remain elevated, and that credit card delinquencies—highest among younger borrowers—also increased among those ages 30–39 and 40–49.
Rates, student loans, and bankruptcies
The commentary asserts auto loan and credit card rates peaked in August 2024, leaving many with elevated monthly payments just as real disposable income growth slowed. It says the resumption of student loan payments coincided with increased student loan delinquencies and weakening credit card and auto loan performance. The authors also note consumer bankruptcies rose 11% in 2025, with early forecasts suggesting increases as high as 20% in 2026.
Bottom line from the authors
Carter and Silvia argue that falling savings, rising borrowing, and broadening delinquencies signal growing financial fragility—even without an immediate recession. They contend the key risk is not a single data release on GDP or unemployment, but a slow deterioration in household balance sheets during an expansion.
Attribution: The analysis and all specific figures above are presented as reported by James Carter and John Silvia in their commentary, which cites the Federal Reserve Bank of New York and the Federal Reserve’s Financial Stability Report.
