WHATS BEHIND CONSUMERS FORTITUDE?
First of all, workers are more productive than in past recoveries, meaning the same pace of job growth now generates more output growth — and thus more income growth — than it used to. Moreover, with inflation historically low, incomes stretch a lot further. Through the second quarter, real income from wages and salaries was growing just shy of 5%, very close to the average performance during the boom years of the late 1990s. Second, low interest rates — the main fuel for housing — and past gains in household wealth have enhanced consumer finances. True, since the end of the recession, household liabilities have increased by $2.9 trillion. But assets have grown by $10.6 trillion. Household net worth began 2005 some 12% higher than it was at the peak of the stock market bubble in 2000. Rising home equity has accounted for about 70% of that increase. Lastly, households in general are able to service even the higher pace of borrowing. Despite rising mortgage debt, overall debt service
