WASHINGTON - American families will need to continue to reduce debt, which means consumer spending and economic growth will be slow to accelerate, according to research from the Federal Reserve Bank of St. Louis.
Even after households trimmed borrowings after the 2008 financial crisis, there is room to keep cutting before getting back to levels seen in 2000, researchers William Emmons and Bryan Noeth wrote in the report issued Wednesday. As of the first quarter of 2014, people born between 1930 and 1995 still had more debt after adjusting for inflation than those of the same age did 14 years ago, they found.
“Families that are reducing their debt are, by definition, not spending all of their income,” Emmons and Noeth wrote. “Given the evidence discussed here of widespread ongoing debt declines among younger families, overall economic growth will be damped for some time.”
While millennials get called a lot of names - basement-dwellers, entitled, broke - one label that won’t stick is “generation debt.” That distinction goes to those born between 1965 and 1980, or the so-called Generation X, according to St. Louis Fed research. Members of that group still have debt levels that are 60 percent higher than their same-age counterparts had in 2000, the report showed.
A person born in 1970 had an average $142,077 in household debt in the first quarter, according to the report. That compares with $88,553 for 44-year-olds in 2000.
Members of Generation X reduced debt by about 15 percent since 2008, while millennials trimmed it by 25 percent relative to others of the same age six years ago. The researchers noted that millennials, due to their age during the housing boom, may also have had less access to borrowing than older Americans.