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Consumer Credit Slows in the First Quarter of 2025

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Consumer credit continued to rise in early 2025, but the pace of growth has slowed. Student loan balances rose year-over-year as borrowers resumed payments following the end of pandemic-era relief. However, growth remains modest. Credit card and auto loan debt also increased, though both experienced their slowest annual growth rates in years. Despite historically high interest rates, credit card and auto loan rates have begun to ease slightly, providing some relief for consumers facing elevated borrowing costs.

Total outstanding U.S. consumer credit reached $5.01 trillion for the first quarter of 2025, according to the Federal Reserve’s G.19 Consumer Credit Report. This is an increase of 1.53% at a seasonally adjusted annual rate (SAAR) compared to the previous quarter, and a 1.93% increase compared to last year. Both rates have slowed from the previous quarter.

Nonrevolving Credit

Nonrevolving credit, largely driven by student and auto loans (the G.19 report excludes mortgage loans), reached $3.68 trillion (SA) in the first quarter of 2025. This marks a 1.23% increase (SAAR) from the previous quarter, and a 1.56% increase from last year.

Student loan debt balances stood at $1.80 trillion (NSA) for the first quarter of 2025, marking a 2.48% increase from a year ago. The end of the COVID-19 Emergency Relief—which allowed 0% interest and halted payments until September 1, 2023—led year-over-year growth to decline for four consecutive quarters, from Q3 2023 through Q2 2024, as borrowers resumed payments and took on less new debt. While the past three quarters have shown a return to growth, the current pace of growth remains below pre-pandemic levels.

Auto loans reached a level of $1.56 trillion (NSA), showing a year-over-year increase of only 0.26%, marking the slowest growth rate since 2010. The deceleration in growth can be attributed to several factors, including stricter lending standards, elevated interest rates, and overall inflation. Auto loan rates for a 60-month new car stood at 8.04% (NSA) for the first quarter of 2025, a historically elevated level. However, auto rates have slowed modestly, decreasing by 0.18 percentage points compared to a year ago.

Revolving Credit

Revolving credit, primarily made up of credit card debt, rose to $1.32 trillion (SA) in the first quarter of 2025. This represents a 2.36% increase (SAAR) from the previous quarter and a 2.98% increase year-over-year. Both measures reflect a notable slowdown, marking the weakest growth in revolving credit in several years. This deceleration comes as credit card interest rates remain elevated, with the average rate held by commercial banks (NSA) at 21.37%. Although rates have hovered near historic highs since Q4 2022, the past two quarters have shown modest year-over-year declines, reflecting the impact of rate cuts that began in 2024.

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Residential Building Worker Wage Growth Slows Amid Softer Labor Market

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Wage growth for residential building workers continued to slow in March 2025, reflecting softening in the construction labor market, according to the latest report from the U.S. Bureau of Labor Statistics (BLS).

On a nominal basis, average hourly earnings (AHE) for residential building workers reached $38.76 in March 2025, up 4.5% from $37.10 a year ago. This marks a continued deceleration in the year-over-year wage growth, which peaked at 9.3% in June 2024. The recent slowdown reflects an easing of pandemic-related labor shortages and a softening labor demand in the construction sector. In March, the construction labor market saw a decline in job openings as employers slowed hiring plans amid ongoing economic uncertainty.

Despite the slowdown in wage growth, residential building workers’ wages remain competitive:

10.2% higher than the manufacturing sector ($35.17/hour)

24.0% higher than the transportation and warehousing sector ($31.25/hour)

3.7% lower than the mining and logging sector ($40.23/hour)

Note:

Data used in this post relate to all employees in the residential building industry. This group includes both new single-family housing construction (excluding for-sale builders) and residential remodelers but does not include specialty trade contractors.

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Job Growth Slows Slightly in April

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The U.S. job market slowed slightly in April, with notable downward revisions to February and March figures. The unemployment rate held steady at 4.2%. The labor market remains resilient despite growing economic uncertainty, though early signs of softening are beginning to emerge.

In April, wage growth remained unchanged. Year-over-year, wages grew at a 3.8% rate. Wage growth has been outpacing inflation for nearly two years, which typically occurs as productivity increases.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 177,000 in April, following a downwardly revised increase of 185,000 jobs in March. Since January 2021, the U.S. job market has added jobs for 52 consecutive months, making it the third-longest period of employment expansion on record. Monthly employment growth has averaged 144,000 per month in 2025, compared with the 168,000 monthly average gain for 2024.

The estimates for the previous two months were revised down. The monthly change in total nonfarm payroll employment for February was revised down by 15,000 from +117,000 to +102,000, while the change for March was revised down by 43,000 from +228,000 to +185,000. Combined, the revisions were 58,000 lower than previously reported.

The unemployment rate remained unchanged at 4.2% in April. While the number of employed persons increased by 436,000, the number of unemployed persons increased by 82,000.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—rose one percentage point to 62.6%. Among individuals aged 25 to 54, the participation rate rose three percentage points to 83.6%, marking the highest rate since September 2024. Despite these gains, the overall labor force participation rate remains below its pre-pandemic levels of 63.3% at the beginning of 2020. Additionally, the rate for the prime working-age group (25 to 54) has been trending downward since peaking at 83.9% last summer.

In April, industries like health care (+51,000), transportation and warehousing (+29,000), and financial activities (+14,000) continued to see gains. Meanwhile, federal government employment lost 9,000 jobs in April and has shed 26,000 since January 2025, reflecting the effects of government cutbacks. The BLS notes that “employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.”

Construction Employment

Employment in the overall construction sector increased by 11,000 in April, following a downwardly revised gain of 7,000 in March. While residential construction gained 3,400 jobs, non-residential construction employment added 8,000 jobs for the month.

Residential construction employment now stands at 3.3 million in April, broken down as 956,000 builders and 2.4 million residential specialty trade contractors. The six-month moving average of job gains for residential construction was -1,583 a month, mainly reflecting the three months’ job loss over the past six months (October 2024, January 2025, and March 2025). Over the last 12 months, home builders and remodelers added 5,000 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,367,000 positions.

In April, the unemployment rate for construction workers rose to 5.2% on a seasonally adjusted basis. The unemployment rate for construction workers has remained at a relatively lower level, after reaching 15.3% in April 2020 due to the housing demand impact of the COVID-19 pandemic.

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Jobs Openings Fall as Economy Slows

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Consistent with soft sentiment data, the count of job openings for the overall economy and construction fell in March as employers slowed hiring plans amid a broader economic slowdown, per the March Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS).

The number of open jobs for the overall economy declined from 7.48 million in February to 7.19 million in March. This is notably smaller than the 8.09 million estimate reported a year ago and reflects a softened aggregate labor market. Previous NAHB analysis indicated that this number had to fall below 8 million on a sustained basis for the Federal Reserve move on interest rate reductions. With estimates remaining below 8 million for national job openings, the Fed, in theory, should be able to cut further despite a recent pause. However, tariff proposals may keep the Fed on pause in the coming quarters.

The number of open construction sector jobs fell from a revised 286,000 in February to 248,000 in March. This nonetheless marks a significant reduction of open, unfilled construction jobs than that registered a year ago (338,000) due to a slowing of construction activity. The chart below notes the recent decline for the construction job openings rate, which is now back to 2019 levels.

The construction job openings rate moved lower to 2.9% in March, significantly down year-over-year from 4%.

The layoff rate in construction stayed low (1.7%) in March. The quits rate declined to 1.8% in March.

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Job Growth Slows in January

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U.S. job growth slowed in January amid Southern California wildfires and severe winter weather across much of the country. Meanwhile, the unemployment rate edged down to 4.0%. This month’s data indicates that the labor market is slowing at the start of 2025 but remains healthy.

In January, wage growth remained unchanged from the previous month. Year-over-year, wages grew at a 4.1% rate, down 0.2 percentage points from a year ago. Wage growth is outpacing inflation, which typically occurs as productivity increases.

On the annual benchmark revision of the Current Employment Statistics (CES), the seasonally adjusted total nonfarm employment for March 2024 was revised down by 589,000. The average monthly pace of job growth for 2024 was revised down from a previous estimate of 186,000 per month to an average of 166,000.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 143,000 in January, the lowest monthly gain in the past three months. Since January 2021, the U.S. job market has added jobs for 49 consecutive months, making it the third-longest period of employment expansion on record.

The estimates for the previous two months were revised up. The monthly change in total nonfarm payroll employment for November was revised up by 49,000, from +212,000 to +261,000, while the change for December was revised up by 51,000 from +256,000 to +307,000. Combined, the revisions were 100,000 higher than previously reported.

The unemployment rate decreased to 4.0% in January, after accounting for the annual adjustments to the population controls. While the number of employed persons increased by 2,234,000, the number of unemployed persons decreased by 37,000.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—increased one percentage point to 62.6%. For people aged between 25 and 54, the participation rate rose one percentage point to 83.5%. While the overall labor force participation rate remains below its pre-pandemic levels of 63.3% at the beginning of 2020, the rate for people aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

In January, employment in health care (+44,000), retail trade (+34,000), and social assistance (+22,000) increased, while employment declined in the mining, quarrying, and oil and gas extraction industries.

Construction Employment

Employment in the overall construction sector increased by 4,000 in January, after 13,000 gains in December. While residential construction lost 200 jobs, non-residential construction employment added 4,400 jobs for the month.

Residential construction employment now stands at 3.4 million in January, broken down as 956,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 1,350 a month. Over the last 12 months, home builders and remodelers added 40,100 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,376,600 positions.

The unemployment rate for construction workers has remained at a relatively lower level, after reaching 15.3% in April 2020 due to the housing demand impact of the COVID-19 pandemic.

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Residential Construction Inputs Price Growth Slows in 2024

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Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were unchanged in December according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. This index grew 0.8% over 2024, the lowest yearly increase in the index since its inception in 2014.

The inputs to the new residential construction price index can be broken into two components—one for goods and another for services. The goods component increased 1.7% over the year, while services decreased 0.4%. For comparison, the total final demand index increased 3.3% in 2024, with final demand with respect to goods up 1.8% and final demand for services up 4.0% over the year.

Input Goods

The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. The price of input goods to new residential construction was down 0.1% in December from November. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index.

The price of goods used in residential construction grew 1.7% in 2024, slightly higher than the growth in 2023 of 1.0%. This growth can be attributed to the rise in the prices of building materials, which grew 2.2% in 2024. The price of energy inputs fell for the second straight year, down 5.3% in 2024.

At the individual commodity level, the five commodities with the highest importance for building materials to the new residential construction index were as follows: ready-mix concrete, general millwork, paving mixtures/blocks, sheet metal products, and wood office furniture/store fixtures. Across these commodities, there was price growth for most commodities in 2024 except for sheet metal products. Ready-mix concrete was up 5.1%, wood office furniture/store fixtures up 4.3%, general millwork up 2.5%, paving mixtures/blocks up 2.3% while sheet metal products were down 0.2%. The commodity used in new residential construction the featured the highest price growth in 2024 was softwood lumber, not edge worked, which increased 14.7% in 2024. The commodity where prices declined the most was No. 2 diesel fuel, down 13.9%.

Input Services

Prices of inputs to residential construction for services were up 0.5% in December from November. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.8% in 2024 after growing 5.8% in 2023.  Across individual services, credit deposit services advanced the most in 2024, up 21.2% over the year while the prices for metal, mineral and ore wholesaling services fell the most, down 19.2%.

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Inflation Slows in September

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Inflation continued to ease in September and remained at a 3-year low as shelter costs continued to moderate. Shelter costs, the main driver of inflation since early 2023, saw their annual growth rate fall below 5% for the first time since February 2022. With the Fed beginning its easing cycle with a half-point cut last month, lower interest rates could help ease some pressure on the housing market.

Though shelter remains the primary driver of inflation, the Fed has limited ability to address rising housing costs, as these increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. However, the Fed’s tools for promoting housing supply are constrained.

In fact, tight monetary policy hurts housing supply because it increases the cost of AD&C financing. This can be seen on the graph below, as shelter costs continue to rise at an elevated pace despite Fed policy tightening. Nonetheless, with the Fed shifting to a more dovish stance, along with additional apartment supply supported by real-time private data, NAHB expects to see shelter costs to continue decline in the coming months.

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.2% in September on a seasonally adjusted basis, the same increase as in July and August. Excluding the volatile food and energy components, the “core” CPI increased by 0.3% in September, the same increase as in August.

The price index for a broad set of energy sources fell by 1.9% in September, with declines in gasoline (-4.1%) and fuel oil (-6.0%) offset by increases in electricity (+0.7%) and natural gas (+0.7%). Meanwhile, the food index rose 0.4%, after a 0.1% increase in August. The index for food away from home increased by 0.3% and the index for food at home rose by 0.4%.

The index for shelter (+0.2%) and food (+0.4%) were the largest contributors to the monthly increase in all items index, accounting for over 75% of the total increase. Other top contributors that rose in September include indexes for motor vehicle insurance (+1.2%), medical care (+0.4%), apparel (+1.1%) and airline fares (+3.2%). Meanwhile, the top contributors that experienced a decline include indexes for recreation (-0.4%) and communication (-0.6%).

The index for shelter makes up more than 40% of the “core” CPI. The index saw a 0.2% rise in September, following an increase of 0.5% in August. Both the indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.3% over the month. These gains have been the largest contributors to headline inflation in recent months. 

During the past twelve months, on a non-seasonally adjusted basis, the CPI rose by 2.4% in September, following a 2.5% increase in August. This was the slowest annual gain since February 2021. The “core” CPI increased by 3.3% over the past twelve months, following a 3.2% increase in August. The food index rose by 2.3%, while the energy index fell by 6.8%.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than overall inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).

In September, the Real Rent Index remained unchanged after a 0.1% increase in August. Over the first nine months of 2024, the monthly growth rate of the Real Rent Index averaged 0.1%, slower than the average of 0.2% in 2023.

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Price Growth for Inputs to Residential Construction Slows in August

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Prices for inputs to new residential construction, excluding capital investment, labor and imports decreased 0.1% in August according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. Compared to a year ago, this index was up 0.8% in August after a 1.8% increase in July. The inputs to new residential construction price index can be broken into two components­—one for goods and another for services. The goods component increased 0.2% over the year, while services increased 1.9%. For comparison, the total final demand index increased 1.7% over the year in August, with final demand goods flat and final demand services up 2.6% over the year.

Input Goods

The goods component has a larger importance to the total residential inputs price index, around at 60%. The price of inputs to residential construction, goods, remained flat in August after increasing 0.1% in July. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less foods and energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. Prices for inputs to residential construction, goods less food and energy, were up 1.6% in August compared to a year ago. This year-over-year growth has come down since April, when it was at 2.5% and remains well below the growth in August of 2022, when it was at 14.7%.

The graph below focuses on the data since the start of 2023 for residential goods inputs. Energy prices have retreated over the past year, with only two periods of growth in 2024.

Input Services

Prices of inputs to residential construction, services, fell 0.2% in August after remaining flat in July. The price index for service inputs to residential construction can be broken out into three separate components, a trade services component, a transportation and warehousing services component, and a services less trade, transportation and warehousing component. The most vital component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%).

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