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Job growth resulting from cheaper credit to cushion blows from U.S. sequestration cuts

credit-card-finance2As automatic, across-the-board spending cuts begin to take effect in the U.S., data from the Federal Reserve revealed that banks are more willing to lend and Americans are more willing to borrow.

“There’s a continuing loosening of credit standards, and more importantly, demand for credit is up,” Sam Coffin, an economist at UBS Securities, said, according to Bloomberg. “All that is good for growth and jobs.”

UBS expects payrolls to increase by an average of 200,000 per month over the next year, up from 181,000 per month last year.

Easier access to low-cost credit resulting from increased competition among lenders will likely sustain a rise in home and auto sales, thereby spurring job creation in the manufacturing and construction industries. Entrepreneurs will also be able to access financing in order to establish retail outlets and hire new staff, which will provide a cushion for the labor market, Bloomberg reports.

Easier access to credit could stimulate growth in hiring, despite the inability of Congress and President Obama to reach a deal on replacing $1.2 trillion of budget cuts that will take effect over the next nine years.

More than 19 percent of banks reported rising demand for industrial and commercial loans in the fourth quarter of last year, compared to 6.2 percent that reported a decline in the previous quarter. Demand also increased for prime residential mortgages, business loans, auto loans and commercial real estate loans.

“It’s starting to happen,” Bill Hampel, the chief economist for the Credit Union National Association, said, according to Bloomberg. “There are people who want to lend, and people who want to borrow. It’s getting stronger in the past six months or so. It just takes time to get away from the level of fear we saw during the crisis.”

The Federal Reserve Bank of New York reported last week that household debt had increased by $31 billion, or 0.3 percent, to reach $11.3 trillion in the fourth quarter, marking the first borrowing increase in seven quarters and only the second increase since the 2008 financial crisis.

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