The striking resilience of the American consumer is a key reason why the economy has avoided a recession. There are early signs, however, that households are becoming strained.

• That's the takeaway from a New York Fed report out this morning that shows delinquency rates on credit cards and auto loans spiking to their highest since the Great Recession.

Why it matters: Emerging stress on household balance sheets is one of the few worrying signs for a U.S. economy that has continued to shrug off threats.

• The upswing in delinquency rates are an indication that the Federal Reserve's aggressive interest rate hikes are hitting consumers, who are struggling with the higher cost of borrowing.

What they're saying: "Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels," Wilbert van der Klaauw, an economic research adviser at the New York Fed, said in a press release.

• "This signals increased financial stress, especially among younger and lower-income households."

By the numbers: An annualized 8.5% of credit card balances and 7.7% of auto loan balances moved into delinquency status in the final months of 2023, according to the New York Fed's quarterly report on household debt and credit.

Yes, but: Other types of debt — like student loans and mortgages — have delinquency rates below pre-pandemic levels.

• Overall delinquency rates rose a tick to 3.1% in the fourth quarter — that's still 1.6 percentage points below the pre-pandemic level.
• The New York Fed noted that missed federal student loan payments won't be reported until the end of this year — which keeps the reported rates of delinquency low.

Between the lines: The upswing in delinquency rates for credit cards and car loans is perplexing against a backdrop that would appear to allow for a healthy consumer — including a strong labor market and wages that are finally rising in real terms.

• On a call with reporters, New York Fed researchers noted pockets of overextended consumers and churn in the labor market that has left some people unemployed, which might be contributing to higher delinquency rates.

Flashback: The rising share of late payments is a reversal from the height of the pandemic when student loan and mortgage forbearance, as well as stimulus payments, pushed delinquency rates to historic lows.

• Delinquency rates have been edging higher since those policies have expired.
• Credit conditions are significantly tighter now. Banks, for instance, reported even tighter lending standards in the fourth quarter, according to the Fed's Senior Loan Officer Opinion Survey, released yesterday.
• "Appetite to make consumer loans (credit card, auto & personal loans) remains very weak and suggests lending growth in this area, that is so important for consumer spending, will soon contract" in annual terms, ING economist James Knightley wrote.

A big surge in market interest rates on Friday and Monday is set to make borrowing more expensive across the economy.

By the numbers: Two-year Treasury securities, sensitive to the anticipated path of monetary policy, yielded 4.47% at yesterday's close, up from 4.19% at Thursday's close.

• Longer-term yields — which drive mortgage and other borrowing costs — also spiked, with the 10-year yielding 4.16% at Monday's close, up from 3.86% Thursday.
• The move was enough to push mortgage rates back over 7% — to 7.04% for a 30-year fixed, per Mortgage News Daily, up from 6.63% Thursday.

State of play: A robust jobs report Friday was followed by Fed chair Jerome Powell affirming that rate cuts are probably not on the way next month, speaking in a "60 Minutes" appearance Sunday night.

• Then Monday, Minneapolis Fed president Neel Kashkari raised the possibility that current interest rate policy isn't restricting the economy as much as it might seem — which would imply fewer rate cuts ahead.
• Also Monday, the Institute for Supply Management's index of activity in the services industry came in hot, at 53.4% for January, up from 50.5% in December.

Yes, but: Rates are still comfortably below November levels, before a wave of data and Fedspeak raised market confidence that significant rates cuts will occur in 2024.

Between the lines: Investors are jumpy right now as they reassess the odds that the Fed is on a glide path toward cheaper money — so volatility like that over the last two trading sessions could well continue.