This week, we look at the plateau in weekly unemployment claims, amid growing pessimism over fourth quarter growth; we look at the end of an era at LendingClub, which is shutting down its pioneering retail note platform; and, we highlight partnerships between BNPL players and brick-and-mortar retailers, with both Klarna and Afterpay announcing key partnerships this week.

Let’s get to it.

New Unemployment Claims Steady…

On the macro front, initial jobless claims again came in the mid-800s, falling by 9,000 to 840,000 in the week ended October 3rd. Although a slight improvement, new weekly claims have stabilized at levels far above the pre-COVID-19 peak, and have yet to show significant signs of recovery.

Source: Labor Department, WSJ, PeerIQ

With hiring gains slowing and jobless claims continuing apace, economists surveyed by the WSJ now expect the economy to take until 2023 – or later – to fully recover the jobs lost this year.

…While New Stimulus Remains Elusive

As of the writing of this week’s newsletter, Washington continued to dither on a new round of stimulus, with time running short to pass a new package before the November election. The latest rumored White House proposal, tagged at $1.8Tn, was expected to face stiff resistance in the Senate if it were to come to pass.

With stimulus prospects growing bleak, economists interviewed by Bloomberg this week stressed the potential fallout for fourth-quarter economic growth, with WFC economist, Jay Bryson, noting that “growth will likely slow to mid-single digits in the fourth quarter from roughly 30% in the third….”

This is increasing overall worries that the labor market may not fully recover soon, as Federal Reserve Chair, Jay Powell, pointed out this week – and as his colleagues have increasingly highlighted:

Source: Arbor Research & Trading, Federal Reserve, PeerIQ

Checking in on Borrowers

As readers know, each week throughout the pandemic, we’ve been monitoring borrowers who have taken advantage of the various forbearance programs on offer by lenders.

As the months have gone by, we note that the vast majority of borrowers have returned to current; as a share of balances, April to June cohorts are reaching 85% current after 60+ days.

Source: PeerIQ Analytics Platform

Source: PeerIQ Analytics Platform

We’ve also been watching the share of loans that move from forbearance into delinquency, and again, would note that the July cohort seems to be reaching higher delinquency ratios (above 14%) versus the better-performing earlier groups.

Reach out to your PeerIQ client service representative to learn more about this, and similar, analyses available on the platform.

LendingClub Ends Retail Note Program

Big news from industry pioneer, LendingClub, this week, which announced that by year-end, it would no longer be offering its retail note program – and would cease accepting new accounts immediately. In an email sent to retail investors, the firm emphasized that,

“As we move towards becoming a full-spectrum fintech marketplace bank … it is not economically practical for LendingClub to continue to offer Notes. …

We do not take this decision lightly. Many of our investors consider Notes as a key piece of their investment portfolio, and our individual investors have been an important part of the history and growth of our company.”

The team at LendAcademy puts this as “the end of an era.”

Our take? This was inevitable and surprised it had not shut down when LendingClub shut down LendingClub Advisors. The retail note program exposed LendingClub to potential conflicts of interest and invites regulatory scrutiny from the SEC and CFPB.

Moreover, retail investors (especially non-accredited) have high return requirements and liquidity needs.

A better way for retail investors to access the asset class is thru an institutional asset management – for example, listed ‘40 Act Funds that are subject to fiduciary standards, SEC oversight, independent valuation requirements, and have access to sophisticated data & analytics tools.

Klarna, Afterpay Announce Retail Partnerships

Congratulations to the team at Klarna, led by CEO, Sebastian Siemiatkowski, who announced this week the formation of a five-year partnership with Macy’s department stores. Under the terms of the agreement, Klarna will provide its BNPL service to Macy’s online customers.

Not to be outdone, this week Afterpay – led by CEO, Anthony Eisen, announced a collaboration with Simon Property Group to promote Afterpay’s BNPL service in-store at Simon-owned properties. Customers will be able to initiate in-store purchases directly through the Afterpay app, and pick up their holiday purchases in a contactless manner.


In the News:

Lighter Fare: