“But remember that our models tend to use the change in unemployment rates or the rate of job creation, which we're forecasting to come down to nearly 0, rather than the level of unemployment.”

In context

“om Sanjay Sakhrani with KBW. Sanjay Sakhrani: Andrew, I hate to do this, but I want to go back to the allowance coverage trends going forward. If we zoom into that complex calculation of removing previous and adding future quarters of net charge-offs. In your current forecast, do you have losses sort of rising through the end of next year? And maybe you could just touch on the new macro baseline and what the unemployment rate assumption is? Andrew Young: Yes. So the baseline assumption and our outlook focusing, I imagine you're looking mostly for unemployment rate. So we have it increasing from the 3.6% it is today to 4.3% at the end of this year and then moving higher in the 4s, but staying in the 4s through 2024. That compares to our assumption last quarter of, I believe, it was 5.1%. But remember that our models tend to use the change in unemployment rates or the rate of job creation, which we're forecasting to come down to nearly 0, rather than the level of unemployment. And so it's not just about those factors, too, in our allowance. We're also considering downside scenarios that are much more severe than that baseline. So when you take that into account to your first question around what are we assuming, I'm not going to give specific forecast. Rich listed out kind of the factors that we believe will create upward pressure on our loss rates in the near term, at least. And so we did assume that there's higher losses in the second quarter of next year than the quarter that we just left sort of mechanically, as I described this quarter's allowance. But where that goes from here is just so heavily assumption-laden focused on the back half of the year, I'd really focus your attention much more to delinquencies as the leading indicator to charge-offs, espec”