Americans are eager to see the economy move into higher gear in 2010, but their personal financial struggles appear likely to temper a recovery.

Households are in financial-repair mode. They are trying to rebuild savings accounts, pay down debts, or get by until the job market brings new opportunities.

In many ways, this puts the economy in uncharted waters. Americans have never faced the challenge of bouncing back from such a deep recession while retaining such a high level of debt.

Can households get back on sounder financial footing while providing the fuel of consumer spending that typically drives an economic expansion?

Many forecasters of­fer a “yes, but” answer. Paring back debt burdens doesn’t preclude a rise in consumer spending, they say. But they acknowledge they could be wrong. Even if they’re right, recovery may be tepid, without quick relief in the jobless rate. And the real test of consumer staying power may come later this year as government stimulus programs begin to fade.

"There’s not a lot of gas in the consumer tank," says Brian Bethune, an economist at IHS Global Insight in Lexington, Mass. "In a process of deleveraging, the consumer is just going to be a very elusive individual to track down."

Elusive or not, that individual will be someone to watch as a barometer of recovery.

Here in the working-class city of Revere, Mass., the end of the holiday season hasn’t brought shoppers to a halt. But in this community north of Boston, belt-tightening is a common refrain alongside cautious optimism.

"I live very frugally," says Glen Corriveau, who's looking for work and getting by with a Veterans Affairs stipend and by subletting a bedroom in his apartment. Like many Americans, he blends a can-do spirit with concern that recovery will take time.

"I see us becoming a subterranean society," with many people so discouraged they’ve stopped looking for jobs, he says. He figures a lot of the jobs he’s held before won’t come back. Yet he says he’s hopeful about finding work.

Alan Cohen, another Revere resident, is employed but is also watching his pennies – avoiding debt by owning no credit cards. As a teacher of English as a second language, he has joined America’s growing ranks of freelance or contract workers.

"We have to take responsibility for ourselves," he says, contrasting his attitude today with the more complacent approach he took to personal finances when he worked at a computer company earlier in his career.

Polls suggest that a similar financial restraint – voluntary or not – is taking hold across much of America. An Opinion Research Corp. survey last month asked Americans their top financial resolution for the new year. “Increase savings” was the top answer, chosen by 33 percent of respondents. A close second: paying off debt.

Already, the recession has resulted in a rise in the personal savings rate, which had fallen to historic lows. And levels of household debt, which had risen to historic highs as a share of income, are shrinking.

By some estimates, de­leveraging is happening more because of defaults than because of people opting to pay down their debts. A decline in credit-card debt, for example, closely tracks the rate at which banks are charging off delinquent card loans.

In some cases, job losses are leading to foreclosure or bankruptcy. In others, borrowing has stalled because card issuers have reduced credit limits or raised interest rates.

One positive sign: The "debt service ratio," or the cost of debt payments as a share of personal disposable income, has fallen to 12.85 percent, from nearly 14 percent when the recession began. That overall figure masks wide disparities – millions of households have no debt at all, while others are deep in debt. But the trend is moving in a positive direction.

A sustainable level for US household debt payments is probably 11 or 12 percent of personal income, economists at Morgan Stanley estimated last year, adding that this target could be reached by 2011.

Forecasters at Bank of America Merrill Lynch also say the great balance-sheet repair can occur alongside a modest growth in consumer spending and personal savings. They note that household behavior may hinge on what happens to overall net worth, including the value of houses and stock portfolios. If home prices stabilize and the stock market shows some gains, households will feel less pressure to pay down debts or default.

A big uncertainty is the flow of new credit. Banks, hit by defaults, have their own financial repair to do and feel unable to make many new loans.

As Global Insight’s Mr. Bethune sees it, the key challenge is not bringing household debt down to normal levels, but getting credit flowing in a normal way.

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