May 27--Consumers are in a holding pattern because the economic crisis is "still fresh in their minds," a Discover Financial Services executive says.
He also said U.S. employment gains are illusory and skewed toward minimum-wage jobs.
At a Barclays investment conference last week, Discover Chief Financial Officer Mark Graf said consumers' efforts to reduce their debt levels seemed to stop about 18 months ago, and "there has not been a decided move toward" taking on new debt."
"We need to see a stronger economic backdrop that drives consumer confidence to really get the consumer behaving in a different fashion," he said.
Riverwoods-based Discover had $67.6 billion of loans on its books at the end of the first quarter, up from $63.8 billion in the same period of 2014. It said it has been gaining market share in its card business through new accounts and by increasing the wallet share of existing customers.
Graf wouldn't portray consumer confidence of the U.S. economy as "shaky" but said it's not the type of environment in which people are willing to take on debt.
The Federal Reserve Bank of New York said earlier this month that household debt was largely flat in the first quarter of 2015.
The unemployment rate was 5.4 percent in April, a seven-year low.
But Graf attributes "a big chunk" of that low number to the "drop in labor force participation rates, as opposed to real solid job creation."
The labor participation rate, or the percentage of working-age people who are employed or seeking a job, increased to 62.8 percent in April, up from 62.7 percent in March, says the Bureau of Labor Statistics. The March number matched the lowest percentage since 1978, according to Bloomberg.
"And the job creation that is taking place tends to be more toward the minimum wage end of the scale than toward the middle-class end of the scale," Graf said.
byerak@tribpub.com
