Some Good’ish News?

April 19th, 2012 at 4:43 pm

A moment of downtime before a speaking gig tonight, and I stumbled on two slightly uplifting reports on the economy!

The first suggests that households have largely completed their debt deleveraging cycle.  Maybe, but the indicator to look for here is not simply whether the statistic shown in the figure below–debt payments as a share of disposable income–is back to pre-recession levels.   It’s whether it’s starting to climb again.  Not that you want to see the beginning of another unsustainable debt cycle…but as long as household leverage measures are trending down, the correction probably ain’t over.

Source: NYT

The second report is more of a mixed bag.  State revenues, which lag the broader recovery, are climbing back to pre-recession levels, but as my CBPP colleagues point out, states and cities have been aggressively cutting spending and jobs, and that hurts both communities and slows the national recovery.


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4 comments in reply to "Some Good’ish News?"

  1. Michael says:

    As long as the banksters still run DC, we will have crisis after crisis. This particular crisis is distinguished by the fact that we won’t be anywhere near out of it when the Euro crisis hits.

    Like Global Warming, our grandchildren will wonder why we acted so deranged.

  2. Around The Dial – April 20, 2012 | South By North Strategies, Ltd. says:

    […] Jared Bernstein thinks about debt deleveraging. […]

  3. perplexed says:

    Possibly I’m misinterpreting the underlying data, but don’t we have to be a little careful about interpreting what this statistic is telling us? I thought I read somewhere that a huge portion (in the neighborhood of 50%) of the debt reduction is the result of bankruptcies. We know that wages are stagnant and most of the income gains went to the top 1% who own the debt and very little, if any, of the additional income goes to servicing outstanding debt. If we looked at the income and debt of the debtors alone might we not find a very different story?

    Sorry to rain on the mini-parade but I’m not so sure this is the good news story it used to be in the past. Averages can pretty misleading. Am I missing something that says this is still likely to be good news in spite of the increased income concentration at the top?

  4. urban legend says:

    Until people begin to sense a high probability that they will be able to replace the money they spend with recurring income — mainly that the job they have is probably fairly safe, and that if it turns out not to be, another comparable job is likely to come along fairly quickly — the velocity of their spending decisions will be slow. Eight per cent — in real terms, more like 15 per cent — won’t make much of a dent in that.