Raising Questions and Opportunities for Credit Unions
Sarah Snell Cooke, Founder/CEO, The Credit Union Connection
The U.S. labor market hit the brakes in July, delivering a disappointing jobs report that has many economists and policymakers reevaluating the state of the economy—and credit union executives should be doing the same.
According to the Bureau of Labor Statistics, the economy added just 73,000 jobs last month, a far cry from the robust monthly gains seen in recent years. The bigger story, however, is the gargantuan downward revisions to the previous month’s figures. June’s job gains were slashed 90%, from 147,000 to 14,000, and May’s plummeted from 144,000 to a mere 19,000. That’s 258,000 jobs that disappeared into thin air.
We’ve all felt the changes, yet we’ve been gaslighted into thinking maybe we were wrong. This is not a political statement; both parties are equally guilty of various matters.
What the Data Tell Us
While the unemployment rate held steady at 4.2%, the number of long-term unemployed rose by 179,000 to 1.8 million. Nearly one in four unemployed Americans have been jobless for over six months. Another red flag: the labor force participation rate remains sluggish at 62.2%, down half a point over the past year. And those not in the labor force who still want a job increased by 568,000 year-over-year, up to 6.2 million.
Healthcare and social assistance (unemployment offices, anyone?) continued to show strength, adding 55,000 and 18,000 jobs, respectively. Almost every other sector was flat or down, with the federal government shedding 12,000 jobs, for a total of 84,000 since January.
Even wage growth sucked. Average hourly earnings rose by 0.3%, or 12 cents, to $36.44. Over the past year, wages were up 3.9%, which is still above inflation but slowing like a Yugo driving uphill.
Shifting Narrative
“The latest jobs report was poor, showing modest job gains in July and massive downward revisions to prior months…,” America’s Credit Union’s Chief Economist Curt Long said. “This report reframes several debates, including the overall momentum in the economy, the impact of tariffs and the prospect for rate cuts. Market expectations for a September rate cut jumped on the release of the report, and a cut by the October FOMC meeting is fully priced in. Credit unions are second to none when it comes to helping their members through financial distress, and they are well-positioned to do so should we encounter a period of rising unemployment.”
The bond market agrees with Long that a rate cut in September is now seen as highly likely, along with a second cut by the end of October. The Federal Reserve may have no choice but to ease, especially if employment conditions continue to deteriorate.
What This Means for Credit Unions
For credit union leaders, the July jobs report signals a crucial pivot point: The labor market that has underpinned members’ financial stability and loan performance is heading for rough waters. Credit unions must prepare for these four things.
- Loan delinquencies may tick up. Rising long-term unemployment and slower hiring suggest that members could soon face greater financial stress. All types of loans are likely to experience higher delinquencies, especially among lower-income or younger members.
- Adjusting your collections strategies. As delinquencies rise, credit unions should revisit and potentially refine their collections and member outreach processes. Proactive, empathetic communication and counseling can go a long way in helping members stay current or find solutions.
“These are the times that are critical for credit unions,” Salus Founder/CEO James Chemplavil observed. “I’ve long admired their member- and compassion-centric nature, which is why we focus on working with credit unions to provide solutions for members in a bind. Credit unions are in dire need of younger members, and showing up for them in big and small ways is how we can hope to attract and retain Gen Zs and millennials.”
- Liquidity and margin pressure will stink. If the Fed cuts rates this fall, net interest margins will likely compress further. Credit union leaders already navigating tight margins must think strategically about balance sheet management, possibly leaning more into value-added, fee-based services or re-evaluating deposit pricing.
- Leveraging credit unions’ counter-cyclical tendencies to reinforce our people-helping-people mission. As Long noted, credit unions have served as a beacon to members during economic quagmires. Financial counseling, skip-a-payment programs, and hardship loans are not just helpful; they’re differentiators. Let’s remind members and communities how credit unions step up for them when times are tough!
Bottom Line
July’s jobs report whispers ‘slowdown,’ if not recession. The combination of weak job growth, softening revisions and increased unemployment risk calls for vigilance, compassion and thoughtful strategic planning. In times like these, credit unions often prove their true value—not just as lenders, but as financial partners who show up when it matters most.
Next jobs report drops Sept. 5. Stay tuned.