* Household borrowing rises at fastest clip since 2008

* Increase in household debt first in more than year

* Wealth falls, but seen rising in the third quarter (Adds details, background, analyst comment)

By Pedro Nicolaci da Costa and Lucia Mutikani

WASHINGTON, Sept 20 (Reuters) - U.S. households increased their borrowing by the most since early 2008 in the second quarter, a development that could boost consumer spending and a lackluster economic recovery.

Household debt climbed $39.4 billion, the first gain in more than a year, to $13 trillion in the second quarter, the Federal Reserve said on Th ursday -- just $2 trillion shy of the country's total yearly economic output.

Economists said the rise in borrowing was an indication that the U.S. central bank's accommodative monetary policy and easing financial market conditions were finally filtering through to the real economy.

"It's encouraging news. With credit growth, one would expect to see an increase in spending and investment," said Millan Mulraine, a senior economist at TD Securities in New York.

"While it may not necessarily be evident now, that is a sign that the recovery is likely to gain strength if this trend continues. The problem is, we are not getting strong job growth."

The Fed has held benchmark overnight interest rates near zero since December 2008 and launched three rounds of bond purchases, or quantitative easing, to keep borrowing costs low and stimulate economic growth.

Last week it pledged to keep lending rates at rock-bottom levels through at least mid-2015.

Although household wealth fell $322 billion to $62.7 trillion during the April-June period, economists expect a rebound this quarter.

"Net worth will likely get a boost from increases in house prices and equity prices in the third quarter," said Daniel Silver, an economist at JPMorgan in New York.

Households have struggled to rebuild their assets and income after the country's housing bubble popped and triggered the 2007-2009 recession.

The Census Bureau reported last week that median U.S. incomes fell 1.5 percent to $50,054 in 2011 after adjusting for inflation, the second consecutive annual drop.

Household net worth, which is the value of assets minus debt, peaked at $67.4 trillion in the third quarter of 2007. It dropped to $57.2 trillion in the first quarter of 2009.

Deleveraging continued in the second quarter, with the share of mortgage and non-mortgage liabilities falling to 103 percent of disposable income from 105 percent in the prior quarter.

"This is the lowest since 2003, but still well above the 1990's average of 80 percent of disposable income. More de-levering is needed before consumer spending makes an earnest comeback," said Paul Edelstein, a senior U.S. economist at IHS Global Insight in Lexington Massachusetts.

U.S. non-financial firms held liquid assets amounting to $1.73 trillion, down about $20 billion from the prior quarter. Economists say one of the reasons the U.S. economic recovery has been so sluggish is that businesses are sitting on so much cash. (Editing by Dan Grebler)

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  • Workers are not reaping the gains of their extra productivity.

    Worker productivity grew 11 times more quickly than worker pay between 1979 and 2011: While <a href="http://stateofworkingamerica.org/fact-sheets/key-findings/" target="_blank">worker productivity rose 69 percent</a>, median hourly compensation rose just 6.5 percent, according to the Economic Policy Institute. [Chart credit: <a href="http://stateofworkingamerica.org/chart/swa-wages-figure-4u-change-total-economy/" target="_hplink">Economic Policy Institute</a>]

  • CEO pay has skyrocketed.

    Maybe it's time to consider your CEO's massive pay package as a cut out of your own paycheck. <a href="http://stateofworkingamerica.org/wages/" target="_hplink">CEO pay is more than 200 times</a> that of a typical worker, up from 30 times that of a typical worker in the late 1970s, according to the Economic Policy Institute.

  • There aren't enough jobs.

    At its current rate of job creation, the U.S. will not return to its pre-recession unemployment rate of around 5 percent before 2020, according to the Economic Policy Institute.

  • Job growth was slow even before the recession.

    From the Economic Policy Institute: "The business cycle from 2000-2007 is the weakest full business cycle on record for job creation, due to the fact that demand was insufficient to drive overall GDP gains that were robust enough to generate strong job growth." It appears that the middle class squeeze has hurt job creation and economic growth.

  • We are poorer than we could be.

    Households in the middle fifth of income distribution would have been making $18,897 more per year as of 2007 if their incomes had grown as quickly as overall average incomes between 1979 and 2007, according to the Economic Policy Institute. (The sizable income growth for top earners since 1979 skewed the overall average.)

  • The rich have captured most income growth.

    The top one percent captured 60 percent of total income growth between 1979 and 2007, while the bottom 90 percent was left with just 9 percent of the total, according to the Economic Policy Institute. Moreover, the top one percent's incomes rose 241 percent, in contrast to 11 percent growth for the bottom fifth and 19 percent growth for the middle fifth. [Chart credit: <a href="http://stateofworkingamerica.org/chart/swa-income-figure-2a-real-median-family/" target="_hplink">Economic Policy Institute</a>]

  • Wages have grown more quickly for the rich.

    Wages for the top one percent spiked 131 percent between 1979 and 2010, while wages for the bottom 90 percent of workers rose just 15 percent over that same period, according to the Economic Policy Institute. [Chart credit: <a href="http://stateofworkingamerica.org/chart/swa-wages-figure-4h-change-real-annual-wages/" target="_hplink">Economic Policy Institute</a>]

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    Americans in the bottom tenth of the wage distribution earned less last year than the lowest earners did in 1979, accounting for inflation, according to the Economic Policy Institute. Meanwhile, the real wages of the median worker rose only 6 percent between 1979 and 2011.

  • The American Dream is eroding.

    "Families headed by early baby boomers (born between 1945-1954) are the last generation (on average) to achieve higher living standards than the one that preceded them," the Economic Policy Institute says. Among families with incomes below $28,000 in 1994, less than 1 percent made it to the top fifth of incomes 10 years later, according to the Economic Policy Institute.

  • This has been a lost decade.

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