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Economy Is Up, But More Americans Have Big Debt

NEW YORK (TheStreet) -- The economy has rebounded from a sour first quarter, posting a 4% rise in the second quarter, according to the Bureau of Economic Analysis and U.S. Commerce Department.

While the Bureau says the 4% figure could be revised downward in late August, when more data roll in from the second quarter, analysts did note that consumers are spending more after a rough winter, and that has helped boost the gross domestic product.

"The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (largely driven by credit card purchases), private inventory investment, exports, nonresidential fixed investment, state and local government spending and residential fixed investment," the BEA reports. "Imports, which are a subtraction in the calculation of GDP, increased."

That all points to continued economic growth, but there are ominous signs that the economy, especially as it relates to consumer spending, may fall under the weight of too much household debt.

Read More: Wealth Inequality Roughly Doubled From Great Recession

According to the Washington, D.C.-based Urban Institute, 35% of Americans own debts and unpaid bills that have been reported to nationwide collection agencies.

Altogether, U.S. consumers owed $5,200 each to creditors as of September, the UI reports. 

Some states really are seeing big upticks in debt ratios. Nevada, for example, has 47% of its adult residents reporting debts with collection agencies. Nevada also has the highest per person average debt, at $7,198.

The Silver State is hardly alone. A dozen additional states, with a heavy emphasis on states in the South, have consumer debt ratios of over 40%. States that reported lower consumer debt problems come from the upper Midwest, with Minnesota, North Dakota and South Dakota in the top tier, all with roughly 20% of residents with collection agency debt.

The high percentage of consumer collection agency debt nationwide has been largely ignored, but it's a problem that threatens any economic recovery and the financial health of many households.

Read More: Debt Is Dragging Down the American Dream

"Most people wouldn't blink if told that the majority of Americans carry some debt. But they would be shocked to learn that reported debt in collections is pervasive and threads through nearly all communities," says Caroline Ratcliffe, a senior fellow at the Urban Institute. "Delinquent debt can harm credit scores, which can tip employers' hiring decisions, restrict access to mortgages and even increase insurance costs."

Even without mortgage debt, which is far and away the biggest debt households carry, Americans carry an average $11,592 in personal debt, the Urban Institute says -- and that's $209,768 with mortgage debt. 

That's a big number, and by not paying it down, way too many U.S. consumers may not have the money needed to drive consumer spending and GDP growth. That's a formula for a sluggish economy, and as recent history suggests, it's a formula all too familiar to households struggling to make ends meet.

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