Income Growth Outpaces Household Borrowing

Haughwout, Andrew F.; Lee, Donghoon; Mangrum, Daniel; Scally, Joelle; Van der Klaauw, Wilbert

Discussion Paper

Income Growth Outpaces Household Borrowing

Abstract: U.S. household debt balances grew by $147 billion (0.8 percent) over the third quarter, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Balances on all loan products recorded moderate increases, led by mortgages (up $75 billion), credit cards (up $24 billion), and auto loans (up $18 billion). Meanwhile, delinquency rates have also risen over the past two years, returning to roughly pre-pandemic levels (and exceeding them in the case of credit cards and auto loans), though there are some signs of stabilization this quarter. Are rising aggregate debt burdens sustainable? Or is this expansion to be expected given increases in aggregate income and population size? In this post, we take a look at debt balances scaled by income, tracking the evolution of this ratio over the past twenty-five years.

Keywords: household finance;

JEL Classification: G5;