With the economic recovery seemingly humming along, home prices surging and new stock market highs, most headlines give the impression that U.S. household wealth has bounced back as well.
But that’s not quite true, says a report released Thursday by the Federal Reserve Bank of St. Louis.
Average household wealth is only about halfway back to pre-recession levels, according to an essay from the St. Louis Fed’s new Center for Household Financial Stability.
While many Americans lost wealth because of the recession, the following groups of Americans lost the most in percentage terms: “younger, less-educated and/or African-American and Hispanic families,” said the Center’s essay.
These Americans had higher-than-average concentrations of their wealth in housing and higher debt-to-asset ratios “than less economically vulnerable groups,” wrote the Center’s director, Ray Boshara, and chief economist, William Emmons.
The Center will uses its findings and other research “to inform policymakers, practitioners and financial institutions on ways to help families save and invest more wisely, thus contributing to households’ economic mobility and the nation’s economic growth,” said a statement by the St. Louis Fed.
St. Louis Fed President and CEO James Bullard said it is important to learn more about the link between households’ balance sheets — their savings, assets, debt and net worth, as distinct from wages and income — and the performance of the national economy.
“Work is under way and the partnerships are forming with colleagues throughout the Federal Reserve System, as well as external researchers and others,” Bullard writes in the St. Louis Fed’s annual report. “As we learn more about how microeconomic activity affects the performance of the macroeconomy, this research could have important public-policy implications, including insights for monetary policy.”
A separate Federal Reserve report in March found that Americans overall had regained 91 percent of their losses.
Household wealth dropped $16 trillion from the third quarter of 2007 through the first quarter of 2009. By the final three months of 2012, American households as a whole had regained $14.7 billion.
However, when you adjust for inflation and average across the U.S. population, it’s a different picture. The average household has recovered only 45 percent of its wealth, the St. Louis Fed reported.