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The numbers: The debt burden on the U.S. economy surged in the first quarter as the coronavirus pandemic struck, according to a report from the Federal Reserve released Thursday.
Total domestic nonfinancial debt rose at a seasonally adjusted annual rate of 11.7% in the first three months of the year to $55.9 trillion. That’s the fastest pace since the fourth quarter of 1986. Household debt rose 3.9% and business debt jumped 18.8%, the largest increase since the records began in 1946. Federal debt rose 14.4%.
Real household wealth since 2000
What happened: By another measure, U.S. household net worth dropped by 5.6% in the first quarter to $110.8 trillion, as stock market wealth fell by 23%. That’s the biggest decline on record. With stocks recovering in the second quarter, much of that decline will likely be regained in the second quarter.
Big picture: The massive debt load won’t be any help as the country tries to recover from the sudden shutdown to the economy in the first quarter that threw the economy into a recession. Businesses took on debt because their revenue collapsed.
What are they saying? “Fairy tale endings to this coronavirus are unlikely. There is too much trouble. There is too much debt,” said Robert Brusca, chief economist at FAO Economics.
Market reaction: The Dow Jones Industrial Average DJIA, -5.68% slumped by more than 1,000 points on Thursday after downbeat comments on the economic outlook from Fed Chairman Jerome Powell.
