After a brief decline in card use, consumers are slowly adding to their credit card balances once again. Credit card debt increased by 3.7 percent annualized rate in February after only a slight dip in January, the Federal Reserve said Thursday.
Total revolving debt - primarily composed of credit card balances - rose to $940.6 billion in February, an increase of about $3 billion from January, according to the Federal Reserve's monthly G.19 report on consumer credit . The 1.3 percent card balance decline initially reported in January has also been upwardly revised to a lesser 0.3 percent decline.
Thanks to the latest revolving debt figures, card balances are at their highest level since September 2009, when revolving debt balances reached $947.5 billion. Consumers have added approximately $2.7 billion to their cards so far this year.
Total consumer debt also rose in February, up $17.3 billion to about $3.6 trillion - an annualized increase of 5.8 percent. This balance includes car loans, student loans and revolving debt, but excludes mortgages, so it represents the short-term credit obligations consumers hold in a given month. All figures are seasonally adjusted to account for expected fluctuations.
Consumer spending slows
Despite rising card balances, overall consumer spending has slowed in recent months, according to the Commerce Department .
Its February consumer spending report notes a steep downward revision to its January's spending figures. It now says consumer spending increased only $10.7 billion (0.1 percent) in January - compared to initial estimates of a 0.5 percent increase. February spending increased by just $11 billion (0.1 percent).
"Instead of a great start to 2016, it now looks like the U.S. consumer will not be as supportive of the U.S. economy in the first quarter as we had previously expected," said TD Bank Economist Fotios Raptis in a research note . "Still, we remain of the view that spending will begin to accelerate as the accumulated savings and improving labor markets give Americans more confidence to shop."
The personal savings rate - savings expressed as a percentage of disposable income - has inched up to 5.4 percent from 5.3 percent in January as consumers put away $733.6 billion in February, compared to $720.3 billion in January.
Job market growth continues
Consumers may become even more comfortable spending with cards as job and wage growth continues, according to the latest monthly employment report.
According to the Labor Department , 215,000 jobs were created in March, above the 205,000 job gains analysts predicted, according to TD Economics . Employment gains have averaged 209,000 per month over the past three months.
Another positive bit of news is the slight increase of the labor force participation rate, which represents the portion of consumers who are working or actively looking for work. The labor force participation rate is now 63 percent, the highest it's been since September 2015, when the rate dipped to 62.4 percent, a 38-year low, according to historical data.
"That's good news, and shows that today's robust labor market with near-record levels of job openings is beginning to draw more sidelined workers back into the labor force," Andrew Chamberlain, chief economist at Glassdoor Economic Research, wrote in an analysis .
The increased participation rate helped keep the unemployment rate largely unchanged at 5 percent.
Wages began rising again in March, too. Average hourly earnings for all employees rose 7 cents to $25.43 following a 2-cent decline in February, according to the Labor Department, increasing 2.3 percent over the past year.
Although overall wage growth has been slow, if job creation figures remain strong, that may soon change.
"Watch for wage growth to accelerate in coming months as employers struggle to fill open positions," Chamberlain said.
Rate hikes are still on pause
Despite consistently positive U.S. employment news, Federal Open Market Committee meeting minutes released Wednesday revealed Federal Reserve officials May hold off raising their benchmark interest rates again this month.
"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run," according to the meeting minutes.
On March 29, Fed chair Janet Yellen said they will "proceed cautiously" when it comes to raising interest rates due to mixed global economic conditions and gradually rising inflation.
For now, balance-carrying cardholders will likely have more time to pay down their debts before their variable-rate card APRs increase as they did following the Fed's December 2015 rate hike of 0.25 basis points.