Household debt has climbed about 25 percent from the post-recession low of $12.7 trillion to a record $14 trillion in mortgages, credit cards, student loans and other debt.
The rising debt was encouraged by low unemployment, strong consumer confidence and low borrowing rates, according to the New York Federal Reserve.
However, that means it will be harder to pay back in the next recession when unemployment rises, CNN reported.
Although business debt is “historically high” and Q3 GDP reflects weakness in business investment, Federal Reserve Chairman Jerome Powell signaled on Wednesday that he’s not particularly concerned about consumer borrowing.
The U.S. economy is in the 11th year of this expansion, Powell told Congress on Nov. 13.
“The ratio of household borrowing to income is low relative to its pre-crisis level and has been gradually declining in recent years,” Powell told lawmakers on Capitol Hill.
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Mortgages account for the largest piece of U.S. consumer debt — $9.44 trillion, up by $31 billion from the end of the second quarter, according to the NY Fed. Student loan debt rose 1.4 percent to $1.5 trillion, and credit card balances rose $13 billion in the third quarter.
Interest rate cuts make it cheaper for households and businesses to borrow and refinance existing debt — easy money that could help drive U.S. debt even higher.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, questioned Powell’s use of the mid-2000s as a reference point — a period marked by a historic housing bubble. Household debt relative to income is “way above” the levels of the 1980s and 1990s, Boockvar said, according to CNN.
Listening to Powell talk about rising U.S. private debt is “like hearing a bartender who has handed out drinks all night and then asking why everyone is drunk at the end of the party,” Boockvar said.