Americans are finding it easier to borrow from banks, supporting consumer spending and business investment and helping fuel employment just as U.S. government budget cuts start to take hold.
Data from the Federal Reserve show banks are more willing to lend and their customers are seeking more credit as both groups gain confidence in the economic outlook. That is one reason economists at UBS Securities LLC, who use measures of credit in their employment models, are forecasting payrolls will climb by an average of 200,000 a month in 2013, up from 181,000 last year.
“There’s a continuing loosening of credit standards, and more importantly, demand for credit is up,” said Sam Coffin, an economist for UBS in Stamford, Connecticut, the second-best forecaster of the unemployment rate over the past two years, according to Bloomberg rankings. “All that is good for growth and jobs.”
Easier access to low-cost financing will sustain auto and home sales, spurring employment in manufacturing and construction. It also means entrepreneurs will have the funds to put up outlets such as electronics stores and bagel shops and hire the staff to run them, providing a cushion for the labor market after across-the-board spending cuts to U.S. defense and domestic programs, known as sequestration, began on March 1.
Among those who are borrowing is Ryan Spath, who got a $150,000 four-year loan last month at an interest rate of 5% that he will use to open a Cellairis store in Boise, Idaho.
“It’s a make-or-break thing when you’re a business and you can’t secure financing,” said Spath, 29. “I want to think the credit market is improving.”
Spath and two business partners employ about 45 people at 12 Cellairis franchise locations in Oregon and Washington, mainly kiosks at malls that sell accessories for wireless devices. The Boise shop will be their first full store from which they will offer a wider range of products and do repairs.
After making little progress with bigger lenders, Spath was able to get financing from the Community Business Bank of Georgia in Cumming, near Cellairis’s head office. Spath will manage the store and hire a few people this year, aiming for an August opening. The location will eventually employ eight to 12 people, he said.
The situation is different in the U.K., where Lloyds Banking Group Plc and Banco Santander SA led a drop in U.K. lending in the fourth quarter as the Bank of England said its credit-boosting program will “take time” to feed through to loan growth.