New data from the Federal Reserve revealed that American consumers increased their debt load in December by an adjusted $14.6 billion, a 6.3 percent increase fueled primarily by non-revolving debt like student loans and auto loans.
Non-revolving debt, including personal loans, student loans and auto loans, saw an 11.5 percent or $18.2 billion increase, the largest gain since November 2001, after a $15.3 billion increase in November. Analysts said that student loans are driving consumer credit increases, MarketWatch reports.
Credit card debt, however, fell by $3.6 billion after a $573 million increase in November. Analysts said that credit card debt is not significant enough to drive a strong consumer spending environment.
Job creation and rising home values have boosted consumer confidence, driving consumer spending, which accounts for 70 percent of the U.S. economy. Record low interest rates are also driving the purchase of large-ticket items such as automobiles.
“As consumers are willing to take on additional debt, that’s a good sign that economic growth is beginning to turn around,” Andrew Brodsky, an economist at the New Jersey-based Stone & McCarthy Research Associates, said, according to Bloomberg. “The gains are definitely encouraging.”
Additionally, unemployment figures fell by 5,000 to a seasonally adjusted 366,000, an indication that companies continue to hire. The four-week average fell to 350,500, the lowest recorded number in five years. Economists saw the decrease in unemployment as a good sign because weekly applications point to layoffs and, when layoffs decrease, net hiring usually increases, Mercury News reports.
In January, employers added 157,000 jobs, and revisions in the January jobs report revealed that the economy created 600,000 more jobs in 2011 and 2012 than previously predicted. Despite a decrease in the number of unemployment claims, the unemployment rate did increase by 0.1 percentage points from December to January. For the week ended Jan. 19, approximately 5.6 million people received unemployment benefits, approximately 325,000 fewer individuals than the previous week.