So what’s going on America? We’re borrowing money for spending, but the economy is still growing at sluggish pace? Latest figures from Federal Reserve show that consumer borrowing has hit its highest point in the past ten months.

As media focus falls directly on how to solve the current job crisis, many don’t look at the bigger issue: how consumers are interacting with their money.

July Yields Highest Borrowing in 3 Years

Borrowing has been on the increase for the past ten months and has finally hit a three year peak in July at a whopping $12 billion. Strangely enough, although consumers are borrowing at record amounts credit card usage is down.

Consumer borrowing is currently at a yearly level of $2.45 trillion, 2 percent above the four-year low from last September.

With rumors of a double dip recession, many Americans are on edge and it’s difficult to speculate what each report, percentage and analysis will result in. An increase in consumer borrowing is typically a good sign, but the fact of the matter is jobs openings are scarce and the economy is still far too slow in its recovery.

According to an AP release the economy is at a 0.7 percent growth a month for the first six months this year. This growth rate is by far the slowest in the past two years since the recession ended.

Jobs Are A Cause For Concern

With absolutely no jobs added in August, causing the unemployment rate to stay at a stand still of 9.1 percent. Most wounds are still fresh from the 2008 recession; it is not expected that Americans will be adding debt.

Obama’s jobs speech yesterday proposed a plan to grow the jobs by offering tax incentives and create more jobs for teachers, veterans and construction workers. The American Jobs Act has the goals of putting “more people back to work and more money in the pockets of those who are working,” according to Obama.

The explanation for all this borrowing may just be most consumers are trying to get their finances in order. After consumer confidence took a hit in 2008, most Americans refocused their budgets and re-set their financial goals. More money is but towards increasing savings, and less money is used for credit card purchases.

These facts prove that although the news of increased borrowing is good, it may not mean we are in the clear quite yet.

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  • Felix Branson

    I wasn’t sure what to make of the two consecutive monthly increases in credit card debt, reported for May and June. Even as revolving credit was rising, the delinquency and charge-off rates, reported by the card issuers and the credit reporting agencies, kept falling.  What’s more, the monthly credit card repayment rate remains at near record-high levels, indicating that delinquencies will remain low at least in the coming months, which in turn means that charge-offs will keep falling. In fact, it seems likely that this dynamic will continue for as long as the economy is depressed and unemployment high.