Investors wondering about when this expansion will end are missing the point of how bad the 2008 recession was. We discussed this topic in Is 2008 Financial Crisis A Reason To Be Bullish About Future? It has taken 9 years to recover from that disaster and there is still improvement to be had. The NY Fed’s Q2 household debt report gives us a glimpse at how the consumer is doing now that the expansion has gone on for 9 years. The approximate 50% of consumers who own stocks are also helped by the fact that this is about to be the longest bull market in US history.

The results won’t shock you as there has been continued improvement for households and total debt has increased. To be clear, record debt doesn’t mean record leverage because nominal wages are up and wealth is at a record high as it is burgeoned by the rally in stocks. Household occupants own stocks and real estate, so they have done well. In fact, household leverage is no where near 2008 levels. Owning commodities has been bad this cycle, which is good news for consumers because they are the end users.

Debt Up 16 Straight Quarters

Whenever these reports come out, there are always bearish investors following their recency bias claiming that the consumer never learned their mistakes and there is another debt bubble. If you don’t read the details of the report and just see that total household debt increased for the 16th straight quarter, as you can see from the chart below, it’s easy to think that. 

Source: chart below

Specifically, household debt was up 0.6% or $82 billion to $13.29 trillion. The total is only $618 billion above the previous peak. We say only because that’s not a lot when you adjust for CPI. If the debt would have just increased at the rate of CPI, it would be $14.84 trillion. Nominal wages are increasing, so you can’t expect debt to fall. The big reason this expansion has been so long is debt actually fell in the first few years of it. The debt troughed in Q2 2013 and is up 19.2% since then. It’s fair to say the recovery started in Q2 2013, making this expansion only 5 years old.