Americans struggle to regain their pre-recession wealth
Washington ? Americans’ long journey to regain the wealth they lost in the recession is stalled.
Households failed even to run in place during the April-June quarter as sinking stock prices eroded wealth. Stocks have since recovered about two-thirds of those losses. But based on last quarter’s data, household net worth would have to surge 23 percent to reach its pre-recession peak.
Net worth — the value of assets like homes and investments, minus debts like mortgages and credit cards — fell 2.7 percent last quarter, or $1.5 trillion, the Federal Reserve said Friday. It now stands at $53.5 trillion.
That’s above the bottom hit during the recession, $48.8 trillion in the first quarter of 2009. But it’s far below the pre-recession peak in wealth of $65.8 trillion.
The drop from April to June was the first quarterly decline in Americans’ wealth since early 2009. Before then, net worth had risen slowly for four straight quarters.
Economists generally think household wealth has ticked up in the July-to-September quarter so far, because of higher stock prices. Yet given last quarter’s setback and expectations of scant gains ahead, some economists have pushed back their forecast for when Americans will regain all their lost wealth: Not until the middle of this decade.
Their stagnant wealth will likely keep Americans from spending freely — and the struggling economy from picking up strength. Consumers tend to spend according to how wealthy they feel. And their spending accounts for about 70 percent of the economy. In the meantime, people are saving more and paring debt, Friday’s data showed.
The decline in net worth from April to June amounted to an average drop of $12,941 per household. Average household wealth now amounts to $455,173. That’s up from $415,185 during the recession. But it’s down from a peak of $563,438 in 2007.
One reason why economists foresee only slight gains in wealth is they expect real-estate values to stay weak. Residential real estate accounts for 32 percent of net worth; individual stocks make up 13 percent. The balance includes retirement accounts, taxable mutual funds, bank accounts, bonds and possessions such as cars and jewelry.
During the recession, sinking home equity and stock prices made shoppers skittish. More than a year after the recession is thought to have ended, the housing and stock markets remain fragile. That’s why most Americans aren’t spending as much as they typically do after recessions.
Consumer spending grew at an annual rate of just 2 percent last quarter, about the same pace as in the first three months of this year. Most economists think Americans will spend at about the same pace, or only slightly better, in the current quarter.
By contrast, after the 1981-82 recession, consumer spending averaged a robust 6.5 percent pace during 1983.




