Households, after all, are far more reliant on paychecks (and government benefits) now than during the credit-fueled boom. Consumer credit as a percentage of personal spending, for example, rose from 18.4% in the early 1990s to a peak of 26.3% in December 2008.
It has since dropped sharply, notes Omair Sharif of RBS Securities. But with the level still at 22.8% as of July, “we’re probably not even halfway through” the household debt-shedding process, he says.
That has two broad implications for consumer spending and, in turn, U.S. growth.