3 Things to Ponder As You Start Your Credit Union Week

February 9, 2015 at 8:55 am Leave a comment

As someone who subscribes to the glass half-empty view of the U.S. economy, even I have to admit that Friday’s jobs report is a good indication that we will probably be seeing the Fed raise short term interest rates by the middle of this year.

The most important number to look at in terms of the employment numbers are those that assess wage and workforce participation growth. On both of these fronts, the news was moderately encouraging. Average hourly earnings rose by $0.12 to $24.75 in January. This is encouraging if only because average hourly wages actually dropped by $0.12 in December. Over the last twelve months, wages have grown a tepid 2.2%, but at least it is headed in the right direction.

As for my favorite statistic, the workforce participation rate, this increased to 62.9% in January, following a slight decline last month. Similarly, it’s actually a good sign that the unemployment rate ticked up slightly to 5.7%. This means that more people are actually looking for work. Remember the unemployment rate just represents the number of adults actively looking for work. The more long term unemployed you have, the less reliable it becomes as an indicator of economic growth.

Hanging together, or Hanging Separately

What to do as the big get bigger and the small stay small? As I’ve talked about in a previous blog, the Great Recession accentuated the divide between big and small credit unions. It’s an understatement to say that a disproportionate amount of the industry’s growth is coming from credit unions with $500 million or more in assets.

As a result, now more than ever before, credit unions have to combine resources. A great example of how this can be done comes from an article in today’s Wall Street Journal reporting that a group of small banks are joining together with Lending Club to expand their ability to offer consumer loans.

Participations are clearly a key element in any strategy to combine resources. In addition, websites like Lending Club are radically changing underwriting models. Increasingly, if banks and credit unions aren’t willing to provide uncollateralized loans, there is someone on the Internet who will. Of course, these raise huge compliance issues, most notably indirect lending doesn’t absolve a bank or a credit union from assessing the quality of a loan in which it participates. In addition, with credit unions, such loans can raise membership issues as well.

Still something needs to be done quickly. The WSJ points out that in 1994, banks and thrifts with less than $10 billion in assets held about 69% of U.S. consumer loans; that number has dropped to 9% as of 2014.

Last, But Not Least

I have advocated in this blog space for NCUA to provide live broadcasts of its board meetings. After all, for those of us who track regulations for a living, real time information about where the board members stand is a helpful indicator of what to expect in the future. Therefore, I want to give a belated thumbs up to the agency for announcing last week that starting with its February 19th board meeting, it will begin broadcasting these get-togethers live. Watch out C-SPAN.

Now that the blog’s done, I am going to have to tackle all that snow in my driveway. Amazingly, the snow didn’t magically disappear between the time I went to bed and got up. . .it’s days like this that I wonder why I live in the Northeast.

Entry filed under: Economy, General, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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