Americans are feeling confident enough in the economy to go back to a time-honored tradition -- taking on a little extra debt.
Consumer borrowing surged in November by $20.4 billion, the Federal Reserve said Monday. It was the third straight increase and the largest monthly gain in a decade.
The jump in borrowing was largely because people took out more loans to buy cars and swiped their credit cards frequently to purchase holiday gifts.
In November, total consumer borrowing rose to seasonally adjusted $2.48 trillion. That's nearly at pre-recession levels and up from a post-recession low point of $2.39 billion reached in September 2010. Borrowing had tumbled for more than two years during and immediately after the recession.
Since then, consumers have increased their borrowing in 13 of the past 14 months. Americans are taking on more debt after seeing the unemployment rate drop and the economy improve, albeit modestly. Many are also leaning on their credit cards and loans to make up for wages that haven't kept pace with inflation this year.
Holiday sales were solid in November, and the U.S. auto industry had its two best sales months for the year in November and December. The Fed's credit report appeared to reflect those sales.
The category that measures credit card debt rose in November by $5.6 billion, the most since March 2008. The gauge that tracks auto loans and student loans increased $14.8 billion, nearly matching July's gain that was the biggest since February 2005.
Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, said many consumers were likely persuaded by incentives that retailers and auto dealers offered to boost sales.
Still, Paul Edelstein, director of financial economics at IHS Global Insight, expressed concern that consumers may have relied on their credit cards to finance holiday purchases.
The rise in borrowing comes as many consumers are seeing little to no growth in their paychecks. Inflation-adjusted, after-tax incomes shrank by nearly 2 percent in the July-September period.
To make up the difference, many consumers have reduced the amount they save. The savings rate fell in November to 3.5 percent -- the lowest level since the recession began. The savings rate jumped in 2008 to 5 percent and stayed above that level until early last year.
Sohn said he expects the savings rate to level off near November's level. He also said the increase in consumer demand should prompt businesses to hire more workers. Those gains would allow consumers to finance their spending with rising incomes.
In December, employers added 200,000 jobs and the unemployment rate fell to 8.5 percent, the government said Friday. It was the sixth month in a row that the economy had added at least 100,000 jobs, the longest streak since 2006. And the unemployment rate dropped to its lowest level in nearly three years.
With more jobs and better pay, consumers could step up spending even further. That could lead more companies to add workers, which ultimately drives more spending and more hiring. Economists call that a virtuous cycle.
Still, a recession in Europe could dampen demand for U.S. exports and weaken financial markets.
The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.