Economists say a large part of the slow recovery from the recession is resulting from consumers paying down on their debts and consequently not spending like they used to. Has there really been that much improvement in consumer debt management? N.C. State University economist Mike Walden responds.
“There really has … . If you look at our debt, things like mortgage loans, auto loans, credit card debts — those are all lower now than they were prior to the recession. There is one area of consumer debt that is higher, and that is student loans.
“But delinquency status has improved, more loans are currently being paid off, fewer loans are severely late, compared to the depths of the recession.
“So, we have seen … some improvement in consumer debt management. … I think — and this stands to reason — one of the things the recession did, is … really force people to become more frugal with their spending.
“But we still have a long, long way to go. If you look at the levels of debt that consumers have relative to their income and relative to their investments, it’s still high. And so we still need to see consumers do more of this. And the downside of a consumer and a household paying down on their debt — being more frugal — is that they are more frugal. They’re not going out and spending like they had been. And that means that businesses aren’t seeing the kinds of sales, and that translates obviously into fewer jobs.”Category: Economic Perspective