Borrow and Spend

So this month's job data shows a gain of 180,000, and incomes are up as well:

The employment report offered a reason for consumers’ continued free spending: their incomes keep going up. The average hourly earnings for workers rose 4 percent in March compared with those a year earlier, to $17.22 an hour.

Great news, right? We can all breathe a sigh of relief and join in the bidding war for a new condo. Well, maybe not.

While consumers are spending more, much of that money is borrowed. The Federal Reserve reported yesterday that consumer debt rose in February by $2.97 billion to a record $2.41 trillion. Americans are putting more of that debt on credit cards. The Fed’s measure of revolving debt, which includes credit cards, rose $2.494 billion, after rising $1.229 billion in January.

Ironically, if median incomes really started climbing at rate that would allow for paying off all that debt the Fed would panic and raise rates, leading to higher interest rates and a cooling economy. Again, I have yet to see how this unwinds in a way that doesn't impact housing prices even here on our supposedly safe island.