WASHINGTON – Gradually but steadily, Americans are recovering their vast loss of wealth from the recession, thanks to larger stock portfolios.

Household net worth grew 2.2 percent in the July-September quarter, fueled by a rally on Wall Street that catapulted stock prices. And stocks have risen more since the new quarter began Oct. 1, further boosting wealth.

Those increases are lifting hopes for the economy, especially because Congress seems about to pass a package of tax cuts for most Americans. Both factors help: The stock gains make people feel wealthier, and the tax cuts put more spending money in their pockets.

Consumers’ confidence and access to cash are vital because their spending fuels about 70 percent of economic activity. Last quarter, Americans boosted their spending at the fastest annualized pace in nearly four years.

Net worth is the value of assets such as homes and stocks, minus debts like mortgages and credit cards. It totaled nearly $55 trillion last quarter, the Federal Reserve said Thursday. The increase from July through September occurred even though the value of people’s real estate holdings sank 3.7 percent.

U.S. net worth has risen far from its bottom during the recession: $49 trillion in the first quarter of 2009. Yet it would still have to rise an additional 20 percent to regain its pre-recession peak of $66 trillion. That’s a reminder of the magnitude of wealth Americans lost to the recession.

Advertisement

And despite the latest gains, economists think it will take at least until the middle of the decade for people to regain all their lost wealth. In part, that’s because they expect homes and other real estate values in many areas to decline further.

“Home prices are going to get weaker over the next year as more foreclosed homes get dumped on the market,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics.

Average household wealth now amounts to $425,177. Adjusted for inflation, the average U.S. household’s net worth has risen nearly 8 percent from its early-2009 bottom. But it’s still about 23 percent below its peak of $553,685 three years ago.

Net worth had suffered a setback in the April-June quarter, when it fell 2.6 percent. That was the first quarterly decline since early 2009. At the time, investors’ fears over the European debt crisis had diminished stock portfolios.

Since then, stocks have surged. Last quarter, the value of households’ stock portfolios reached $7.8 trillion. That’s an increase of nearly 14 percent from the April-June quarter.

Driven by its strongest September since 1939, the stock market’s performance last quarter was by far its best quarterly showing in a year. The Standard & Poor’s 500, a broad gauge of the market’s performance, jumped 10.7 percent.

Advertisement

The last quarter to produce higher returns was the July-September period of 2009 — midway through a 13-month rally — when the S&P 500 soared 17 percent.

It all translates into more money for the roughly half of U.S. households that own stocks or stock mutual funds.

Stocks gained $1.4 trillion in value during the quarter as measured by the Dow Jones U.S. Total Stock Market Index.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.