Americans stepped up borrowing in January to buy more cars and attend school.
Consumer borrowing rose by $17.8 billion in January, the Federal Reserve said Wednesday. That followed similar gains in December and November.
The gains for those three months were the largest in a decade and helped consumer borrowing climb to a seasonally adjusted $2.5 trillion. That nearly matches the pre-recession borrowing level.
The January increase was driven by $20.7 billion increase in category that mostly measures demand for auto and student loans. It was the biggest increase for that category since November 2001. Borrowing on credit cards fell $2.9 billion in January after four months of gains.
Many economists believe the rise in borrowing is a sign that consumers are feeling more confident about the economy. But consumers are also borrowing more at a time when their wages have not kept pace with inflation.
The outlook for hiring has improved, which could boost consumer spending in coming months.
In January, companies added 243,000 net jobs and the unemployment rate fell to 8.3 percent, the lowest in three years. The economy has added an average of 200,000 net jobs per month from November through January.
Economists are predicting another strong employment month in February, forecasting the addition of 210,000 net jobs. The government reports Friday on February job growth.
Ellen Zentner, an economist at Nomura Securities in New York, said there were encouraging signs that consumers are feeling better about their finances, largely because of the strong employment gains. That should translate into a greater willingness to borrow.
"We have begun to see in the past few months a sign of greater confidence with households more willing to take on debt," she said. "As long as we keep having job growth, I expect to see credit growth pick up."
But she doesn't expect to see consumers running up huge credit card bills, like they did before the recession. She expects most of the debt to cover auto loans and student loans.
The Conference Board reported last week that consumer confidence rose in February to the highest level in a year. And financial markets have started the year off strong _ the Dow Jones industrial average closed above 13,000 on Feb. 28, the first time that has happened in nearly four years.
But even with the gains in hiring, Americans are seeing little growth in pay. After paying taxes and adjusting for inflation, incomes actually dipped in January. And after adjusting for inflation, consumer spending was flat for a third straight month.
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.