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Fed Reports Increase in Household Wealth; Pew Questions Findings
Friday, September 27, 2013 7:00 AM

Wednesday, the Federal Reserve reported that U.S. household net worth rose 1.8 percent in the second quarter to a record $74.8 trillion. The fed said growth was fueled by a stock market rally and the housing recovery. However, a Pew Research Center Report questions whether the wealth of a typical U.S. household has really fully recovered from the Great Recession.

According to the Fed, household net worth, which is the difference between the value of assets like homes and mortgages and other debts, jumped by a total $1.3 trillion. Home values increased by $525 billion and the value of stocks and mutual funds rose nearly $300 billion.

The rising household wealth, the Fed says, is helping offset wages that have been stagnant after adjusting for inflation. But the gains have mostly benefited the richest Americans. In 2010, only 31 percent of households had stock holdings of $10,000 or more, according to the Economic Policy Institute.

During the recession, household net worth bottomed at $52 trillion in the first quarter of 2009, down from a peak of $68.1 trillion in the third quarter of 2007. But households, in aggregate, recovered all the lost value earlier this year.

Pew Research Center points out that the Fed’s aggregate net worth figures are reported in each year’s dollars and do not account for price inflation. Although the details depend on the particular price index used, Pew reports, prices have gone up about 13 percent from 2007 to June 2013.

“If we put everything in 2013 dollars, net worth amounted to $74.8 trillion as of June 30, 2013. In 2013 dollars, 2007 net worth amounted to $76.5 trillion. So taking inflation into account, aggregate wealth remains about 98 percent of its 2007 pre-recession peak,” writes Richard Fry in the Sept. 26 post.

Pew Research Center also reports that real net worth per household was $684,662 in 2007. Accounting for inflation and household growth, Pew says real net worth per household stands at $652,449 as of June 30, 2013, or about 95 percent of its 2007 level.

Even if real net worth per household had recovered to its 2007 level, Pew reports that it is very likely that a large swath of households has not recovered. Click here to view the Pew Research Center report.