Behind the Numbers: The Consumer Debt Elephant in the Room | The Banking & Payments Show

Release Date: May 13, 2025

Hosts:

• Rob Rubin - Head of Business Development, eMarketer
• Grace Broadbent - eMarketer Analyst
• Oscar Orozco - eMarketer Analyst

Introduction

In the May 13, 2025 episode of Behind the Numbers, hosted by Rob Rubin, the discussion centers around the escalating consumer debt and its implications amid ongoing economic uncertainty. Joining Rob are EMARKETER analysts Grace Broadbent and Oscar Orozco. The conversation delves into current debt statistics, the impact of tariffs on retail prices, and forecasts for consumer debt's trajectory in the near future.

Icebreaker Quiz: Understanding Consumer Debt

Rob Rubin initiates the episode with an engaging icebreaker quiz to set the stage for the discussion on consumer debt.

• Rob Rubin [01:08]: "According to the New York Federal Reserve, in Q4.24, consumer debt was $18.04 trillion, with mortgage debt representing about 70%, $12.6 trillion. What do you guys think that was in Q1 2020, pre-pandemic? How much has debt grown since right before the pandemic?"

Grace Broadbent and Oscar Orozco provide their estimates, revealing their insights into the growth of consumer debt. The actual figure discussed is a post-pandemic spike, highlighting the severity of the debt increase.

• Oscar Orozco [01:58]: "I was gonna be a lot lower. I was gonna say 13, you know, so it's drastically gone well, so this."

Rob reveals the correct pre-pandemic debt was just over $14 trillion, underscoring a substantial rise in consumer debt since then.

Impact of Tariffs on Retail Prices

Rob transitions to the first major segment, discussing a Wall Street Journal article on how major retailers like Walmart, Target, and Amazon have maintained stable prices despite new import tariffs by leveraging supplier negotiations, accelerating shipments, and stockpiling inventories. However, these strategies are nearing their limits, potentially leading to higher prices and product shortages.

• Rob Rubin [03:08]: "So auto loans is not. You should have. It would have been so good."

Oscar Orozco elaborates on which consumer categories will first experience price increases due to tariffs and other economic pressures, identifying apparel and footwear as the most affected due to their high import rates.

• Oscar Orozco [05:06]: "The top one for me is apparel and footwear. I believe the data states that almost 100%, you know, nearly 100% of all of these products are imported. So they're facing these higher tariffs and it's a major shock for retailers."

This segment highlights the immediate impact of tariffs on discretionary spending categories, particularly apparel and footwear, which are essential yet highly price-sensitive.

Consumer Spending and Debt Trajectory

Grace Broadbent and Oscar Orozco discuss the dual nature of consumer behavior in response to rising debt and economic pressures. Grace suggests a combination of increased debt and a pullback in discretionary spending, while Oscar emphasizes the likelihood of a recession driven by these factors.

• Grace Broadbent [07:16]: "I do think consumers are going to take on more debt, but also I do think there will be a pullback in spending."

Oscar adds that sectors like furniture and travel are already showing reduced discretionary spending and elevated delinquencies on store cards.

• Oscar Orozco [08:19]: "Even President Trump has been mentioning dol. It's up there with apparel for being very, very impacted by tariffs."

The discussion also touches on the potential decline in categories like toys and consumer electronics due to their discretionary nature and susceptibility to price increases.

Forecasting Consumer Debt in 2026: Scenario Analysis

In the final segment, Rob Rubin introduces three potential scenarios for consumer debt by 2026:

1. Muddle Through: Economic stability is maintained with possible Fed rate adjustments mitigating debt issues.
2. Hard Landing: Debt reaches a critical point, leading to a recession with increased delinquencies and tightened credit.
3. Selective Jubilee: Government intervention through debt forgiveness or restructuring to alleviate consumer debt burdens.

Rob provides a historical perspective on the concept of a Jubilee, referencing ancient practices and recent attempts like President Biden's student loan forgiveness efforts.

• Rob Rubin [11:20]: "A Jubilee is a large scale government led cancellation or restructuring of private debt to reset the economic game board."

Grace Broadbent and Oscar Orozco weigh in on the likelihood of each scenario. Grace aligns with the "Muddle Through" scenario, while Oscar leans towards the "Hard Landing," expressing skepticism about government intervention.

• Grace Broadbent [13:02]: "My order is exactly the way you just said."
• Oscar Orozco [13:13]: "I think we're heading toward a full on recession here and it's not going to be pretty."

Rob argues for the "Selective Jubilee," suggesting government bailouts, particularly in the mortgage sector, to prevent a housing crisis.

• Rob Rubin [14:44]: "I think it's going to be in the mortgage area and it's because it represents the largest chunk of consumer debt."

Despite differing opinions, all agree on the severity of the situation, with Oscar and Grace expressing concern over the potential economic fallout.

Conclusion

Rob Rubin wraps up the episode by reflecting on the intense discussion surrounding consumer debt and its future implications. He thanks Grace and Oscar for their insights and humor throughout the conversation.

• Rob Rubin [18:35]: "First thank you, Grace and Oscar for laughing along with me. I appreciate it. This was a lot of fun today."

The episode underscores the critical issue of consumer debt, highlighting its growth, the impact of external economic factors like tariffs, and the uncertain paths forward. Listeners are left with a nuanced understanding of the challenges ahead and the potential strategies to mitigate adverse effects.

Notable Quotes:

• Rob Rubin [01:08]: "According to the New York Federal Reserve, in Q4.24, consumer debt was $18.04 trillion..."
• Oscar Orozco [05:06]: "The top one for me is apparel and footwear..."
• Grace Broadbent [07:16]: "I do think consumers are going to take on more debt..."
• Rob Rubin [11:20]: "A Jubilee is a large scale government led cancellation or restructuring of private debt..."
• Oscar Orozco [13:13]: "I think we're heading toward a full on recession here and it's not going to be pretty."
• Rob Rubin [14:44]: "I think it's going to be in the mortgage area..."

Stay Informed: To stay ahead with insights and analysis that matter, tune into new episodes of Behind the Numbers published Monday through Friday wherever you find podcasts.