Part 8/11:
One surprising insight is that bad loan rates and delinquency figures have trended upward even before the economy enters the most severe phase of the flat beverage curve—the "meteor" phase characterized by widespread layoffs and collapses in employment. This indicates that credit markets and household balance sheets are signaling distress long before the official unemployment rate reflects it.
The pressure on credit markets, driven by rising delinquencies, is itself a predictor of worsening employment conditions. Auto and student loan delinquencies are particularly sensitive to employment stability, making them early warning signs of ongoing economic contraction.