NEW YORK (BestCredit.net) -- Since 2008, the U.S. economy has shown relatively consistent signs of improvement. The stock market has recovered all of its pre-recession losses, the national unemployment rate is ready to push back below 7.0% and manufacturing productivity has risen to multi-year highs.
However, this progress has not entirely filtered into all sections of the economy. Personal debt levels remain elevated from the broader historical perspective, and this is discouraging in terms of overall growth prospects as we move into next year.
In addition, the Federal Reserve has committed to start reducing its quantitative easing stimulus programs. At its December meeting, the Fed decided to taper its stimulus purchases by $10 billion each month. It is now clear that the Fed's historic stimulus programs should not be viewed as a long term support mechanism.
Average Debt Levels Show Little Progress
This essentially means that it will become increasingly important for both to more closely monitor consumer behavior in terms of debt levels at the individual and household levels. Recent studies show that consumer debt in America reached $11.3 trillion, which an improvement of less than 1% relative to last year's numbers.
In credit cards, the average consumer debt for households is now seen above $7,200 but this number is artificially skewed by lower income households with larger than normal debt-to-income ratios. When looking at highly indebted households by themselves, the average debt level spikes much higher (to $15,200). These households are especially vulnerable to negative credit events (such as major defaults or even bankruptcies).
Credit defaults and bankruptcies create a significant drag on the economy, as ultimately the lending companies themselves that are forced to foot the bill. This weighs on projections for earnings growth and makes it difficult for the stock market to generate sustainable rallies.