WASHINGTON (AP) -- The average U.S. household has a long way to go to recover the wealth it lost to the Great Recession, a report by the Federal Reserve Bank of St. Louis concluded Thursday.
The
typical household has regained less than half its wealth, the analysis
found. A separate Federal Reserve report in March calculated that
Americans as a whole had regained 91 percent of their losses.
Household
wealth plunged $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 group had regained $14.7 trillion.
Yet
once those figures are adjusted for inflation and averaged across the
U.S. population, the picture doesn't look so bright: The average
household has recovered only 45 percent of its wealth, the St. Louis Fed
concluded.
That suggests that consumer
spending could remain modest as many Americans try to rebuild their
wealth by saving more and paying off debts.
The
number of U.S. households grew 3.8 million to 115 million from the
third quarter of 2007 through the
final three months of last year, the
report said. As a result, the rebound in wealth has been spread across
more people and reduced the average wealth for each household.
In
addition, though inflation has averaged just 2 percent over the past
five years, it's eroded some of the purchasing power of Americans'
regained wealth.
The St. Louis Fed's analysis
noted that the rebound in wealth hasn't been equally distributed. As a
result, many households are even further behind than the average.
Nearly
two-thirds of the increase in household wealth since 2009 is due to
rising stock prices, the authors note. Stock indexes reached record
highs this month. Those gains disproportionately benefit affluent
households: About 80 percent of stocks are held by the wealthiest 10
percent of the population.
For middle- and
lower-income households, home values represent the biggest chunk of
total wealth. And home prices remain about 30 percent below their peak,
even after jumping nearly 11 percent in the past year.
The
analysis was written by William Emmons, an economist at the St. Louis
Fed, and Ray Boshara, who directs its new Center for Household Financial
Stability.
"It's like the economy is this airplane and not all the engines are firing," Emmons said.
Still,
wealthier households account for a disproportionate share of consumer
spending: About 20 percent of Americans account for about 40 percent of
spending.
Consequently, the rise in stock prices should provide some lift to spending, Emmons said.
The
average household had a net worth of $539,500 at the end of last year,
according to a separate paper the St. Louis Fed released Thursday. That
was up from $469,900 in the first quarter of 2009. But it was sharply
below the peak of $641,000 in the first quarter of 2007.
