Recent Changes to a Measure of U.S. Household Debt Service

Changes in aggregate household debt in the United States may contain information about the current state of the economy and may influence its future path. When a large share of household income is devoted to debt repayment, households have fewer funds available to purchase goods and services. Households with high debt levels relative to income are also more likely to default on their obligations when they suffer an unanticipated misfortune such as job loss or illness. Thus, when household debt ratios are high and unemployment is rising, lenders may respond to the expected increase in defaults by limiting the availability of credit; this dynamic may further weigh on spending. An often-used summary measure of household debt is the household debt service ratio (formerly known as the household debt service burden), which the Board of Governors of the Federal Reserve System first published in 1980.