US household debt rose to a record $14.3trn in the first three months of the year, according to the Federal Reserve Bank of New York, the latest snapshot of household finances as Americans were hit by the coronavirus pandemic brought much of the economy to a halt.
This debt lifted by $155bn, or 1.1%, compared to the previous quarter. The New York Fed noted that “the data do not fully reflect the potential effects of COVID-19 that materialized in the second half of March 2020.” More than 30 million Americans have filed for unemployment claims between the second half of March and April alone.
One area where numbers showed a notable decline was credit card debt. Credit card balances fell $34bn, a drop that helped offset non-housing balance increases of $27bn in student loans and $15 billion in auto debt. Mortgage balances rose $156bn to $9.71trn.
“The credit card balance decline was notably larger than the same period last year, which may reflect the early signs of decreased consumer spending due to COVID-19,” the New York Fed said in a release. The fall in card balances came despite total credit limits increasing by $34bn, which left $3trn in available credit lines.
The last two weeks of March hit US consumers hard when most of the country went into strict lockdown to curb the spread of coronavirus. As non-essential businesses closed, record job losses began, and consumers were asked to practice social distancing by staying home. This resulted in a record drop in US consumer spending by a record 7.5% in March.
The New York Fed authors estimate the relief from the government-backed CARES Act and forbearance programs to be more than $370bn of “temporary relief in cash flow to borrowers through deferred payments,” which is around the same size of the $349bn first round of the Paycheck Protection Program.
The Labor Department is expected to follow this data with the release of April’s jobs report on Friday with economists expecting the U.S. to have lost 21.3 million jobs in April, forecasting the unemployment rate to jump from 4.4% to 16%.