For the fourth consecutive quarter, household net worth increased by 2.1 percent according to the Federal Reserve. The main reason for the increase is the growth of stock portfolios lifting net worth in the first quarter. Since then, Wall Street has slumped again. Net worth is the value of assets such as home, checking accounts and investments minus debts like mortgages and credit cards.
There is still a long way to go to get back to pre-recession highs of $65.9 trillion, even with the first-quarter increase, Americans’ net worth would have to rise an additional 21 percent. It’s likely to be a slow and bumpy ride, analyst say with household wealth likely to return to those levels in 2012.
In the beginning of the recession, household net worth dropped to $48.3 trillion in the first quarter of 2009 while stock holdings and home values tanked. As their net worth shrank, Americans spent less. Now that wealth is gradually growing, Americans are slowly spending more. However, the economic recovery is still fragile and the stock-market is still volatile, so people are not comfortable spending lavishly. They usually do during the early phases of recoveries, but not this time. That’s one reason why the country is seeing only modest economic growth. The sharp decline in the stock market in the last month and a half jeopardizes the improvements people have seen in their financial situations and net worth over the past year.