Americans Continue to Take on Record Debt Levels, but Many Households Are Managing Well
November 14, 2024 — US households are reaching record debt levels, but new data from the Federal Reserve Bank of New York shows that most families are handling this increase effectively. As of September 30, household debt (not adjusted for inflation) hit a fresh high of $17.94 trillion, with credit card and auto loan balances driving the largest gains.
While debt is climbing, Americans’ disposable personal income has also risen, hitting $21.8 trillion in the third quarter. The result is a manageable debt-to-income ratio of 82%—lower than the pre-pandemic level of 86% in 2019 and significantly below the Great Recession peak of 120% in 2008.
However, there are some signs of strain. Delinquency rates, while showing slight improvement, continue to indicate stress among certain households. “Still, elevated delinquency rates reveal stress for many households, even amid some moderation in delinquency trends this quarter,” said Donghoon Lee, an economic research adviser at the New York Fed.
The reasons for rising debt balances are diverse. Factors include population growth, an increase in online spending, high vehicle prices, ongoing inflation, and resilient consumer spending. Despite inflation and high interest rates, consumer spending remains robust. Contributing to this is a strong labor market, marking the third-longest expansion on record, and steady wage growth, which has now outpaced inflation for 18 months.
Even with this positive wage trend, some Americans are still recovering from the earlier inflation surge, which eroded pay gains for 25 consecutive months before the recent turnaround.
