Today, debt levels across all economic strata are not problematic. Jobs are plentiful, wages are rising and general economic health is good, so debt levels are manageable.
The problem identified by the St. Louis Fed research is what might occur during the next economic downturn. The resilience of households that are struggling with even modest debt levels is in question. Softness in economic indicators like retail sales, home sales and housing construction indicate that it’s reasonable to fear that the next recession isn’t far away. Oh, and the yield curve has inverted, again.
A more robust economic recovery might have distributed gains more broadly after the credit crisis. But what we got instead was a lumpy and uneven economic recovery, falling to an increasingly narrow group.
The economy appears healthy, but fissures exist below the surface and appear in the form of political populism. Expect to see more of the same when rates rise or if the economy slows.
This column was provided by Bloomberg News.