The economy added 151,000 jobs during August — a solid result but not as good as some analysts had hoped.
According to a statement from the National Association of Federal Credit Unions, the report "fell short of expectations," with job growth and wage gains slowing "while the unemployment rate and labor force participation remained at previous levels," said NAFCU Chief Economist Curt Long.
"Simply put, this report is not enough to compel the Fed to raise rates in September, and the focus will shift to December as the most likely date for the next rate hike," he added.
Brian Turner, president and executive director of Meridian Economics, wrote that even though the August jobs data came in lower than expected, "it still represents a decent pace of growth, albeit continuing recent downward trends." He echoed NAFCU's prognosis that a September rate hike from the Fed is unlikely, but noted that "many believe the economy is regaining momentum after a very weak first half of 2016."
That perspective on the first two quarters was borne out by the latest Credit Union Trends Report from CUNA Mutual Group, which noted credit union loan portfolios increased by just 1.1% in June (the most recent data available), a drop from 1.3% reported in June 2015. Total assets also fell by 0.01% in June as CUs liquidated investments in order to pay down $8 billion in wholesale borrowing. In the 12-month period ending in June, assets rose by 6.9% year-over-year, thanks to a 7.5% increase in deposits and a 7.9% increase in capital, though borrowings dropped by 10.7%.
The number of credit unions in operation also declined at an increased pace during June, ending the month at 6,119 active institutions, down seven from the previous month and a year-over-year drop of 278. That's a slight increase from the 274 credit unions that ceased operation in the 12 months ending in June 2015.
But it's not all gloom and doom. CUNA Mutual reported loan balances growing at a seasonally adjusted annualized growth rate of 10.1%, similar to the credit boom of 2004-2005.
"There is a confluence of factors that will drive double-digit loan growth through 2016," the report said. "The most important one is job growth. The economy is expected to add close to 2.5 million jobs in 2016 and 2.3 million in 2017. As the labor market reaches full employment in the second half of 2016, wage growth will accelerate. That will raise consumer confidence back to pre-recession highs."
While delinquency rates continued to drop (down from 0.74% in June 2015 to 0.70% this year) and are projected to continue to decline, membership gains continue at a steady pace, with 0.37% growth in June, similar to the 0.38% gain reported for June 2015. Overall membership growth is up 3.9% over the past year.
Auto lending was also up by a seasonally adjusted annualized growth rate of 14.4% in June, though CUNA Mutual noted that that was "a slight deceleration from the cyclically high pace set during the last couple of months." Month-over-month, used car loan balances increased by 1.5%, ten basis points higher than what was reported for June 2015.
"June's seasonal factors usually add 0.72 percentage points to the underlying trend growth rate and are typically the largest of the year," the report said. "March through August is considered the used-auto buying and lending season. Credit union used-auto loan balances are typically 62% larger than new-auto loan balances, but a typical used-auto loan is originated at roughly half the dollar amount of a new-auto loan. So even though new-auto loan balances increased 15.4% during the last 12 months and used-auto loan balances grew only 14.4%, many credit unions have had to increase staffing in the used-auto lending area to keep up with the surge in used-auto loan demand."
