The Federal Reserve released its Consumer Financial Survey last Friday (October 9th), showing that American households' ability to repay debts on time has continued to deteriorate over the past three years, with delinquency levels reaching a peak not seen since the end of the global financial crisis. This triennial survey is a core resource for tracking the overall financial health of American residents, covering various livelihood and macroeconomic indicators such as household debt repayment capacity, income, and net worth. This survey also revealed a noteworthy paradox: while income inequality has narrowed slightly, household debt pressure has increased significantly, and the wealth disparity between different age groups, races, and income levels remains pronounced. Meanwhile, a concurrent survey by the New York Federal Reserve also corroborates this, indicating that pessimism among Americans regarding their financial prospects persists.

Household debt repayment ability has deteriorated significantly, and the delinquency rate has risen sharply.

This three-year survey report indicates that the proportion of households unable to fulfill their debt obligations on time has reached its highest level since the survey began in 2010. The US had just emerged from the Great Recession in 2010, an economic recession that lasted from December 2007 to June 2009. The subprime mortgage market collapse triggered a chain reaction of crises, impacting major financial institutions in the US and globally, and causing unemployment to climb to 10% at one point. The latest survey data shows that by the end of 2025, the proportion of households with overdue loans will surge from approximately 12% in the previous survey to nearly 20%, an increase of about 67%. The proportion of households with overdue payments of two months or more has also risen significantly, from 5% in 2022 to over 8%. The report also shows that the household debt-to-income ratio has risen sharply, with the proportion of households whose debt repayment expenditures account for more than 40% of their income rising to 8.6%, up from 6.5% in 2022, a new high since 2013. Although this report's statistical period ends at the end of 2025, the public's concerns about their financial situation have not subsided. A survey released earlier last week by the Federal Reserve Bank of New York showed that many households reported their financial situation had worsened compared to a year ago and expected it to continue to weaken in the coming year.

Income patterns have become more differentiated, with overall income inequality easing slightly.

During the period covered by this survey, the U.S. economy continued to grow, but inflation reached its highest level since the early 1980s. Under these macroeconomic conditions, the median household income, adjusted for inflation, rose by 7%, while average income declined by 6%. The report indicates that households at the bottom of the income and net worth brackets saw slight increases in both median and average income, while income at the top of the income bracket declined. This change suggests a slight decrease in income inequality between the two survey periods. Income performance varied significantly across age groups, with strong income growth for households aged 75 and older; however, households aged 35 to 44 experienced a sharp 25% decline in income, which the Federal Reserve attributed to reduced capital gains for this group. The report also notes that not all groups saw an increase in median income. Non-Hispanic Black households, Asian households, and households at the top of the income and net worth brackets all experienced declines in both median and average income.

Overall net worth saw a slight increase, but the wealth gap remained significant.

Overall, U.S. household net worth has increased. Adjusted for inflation, average household net worth rose 7% to $1.24 million; however, median net worth only increased by 2% to $215,900. The significant difference in growth rates between the two sets of figures indicates that wealth growth is primarily concentrated in the hands of high-income groups. The report notes that the current rate of net worth growth is significantly slower than the 2019-2022 survey period. Education level has become a significant factor in wealth disparity. The median income of those with a college degree is 1.9 times that of those with only partial college education, and their median net worth is nearly three times that of the latter. Wealth has shrunk in low-income groups, while wealth has increased in high-income groups. Households in the bottom quartile of income saw a 6% decrease in median net worth and a 4% decline in average net worth. Net worth has surged in high-income groups, with the median net worth of top-income households increasing by 31%.

Conclusion

This Federal Reserve Consumer Finance Survey reveals that high inflation and rising interest rates have profoundly altered American household balance sheets. While income inequality has improved slightly, household debt pressures have worsened dramatically, with many families falling into loan defaults and debt repayment risks accumulating rapidly. The benefits of wealth growth are concentrated among high-income groups, while the wealth of low- and middle-income families has shrunk, and the financial situations of families of different ages, races, and educational backgrounds vary significantly. Household debt pressures may continue to impact consumer spending power and will remain a crucial risk variable that the Federal Reserve Chairman will need to continuously weigh when formulating monetary policy.