US Household Net Worth Plunged a Record $3.8 Trillion During Fourth-Quarter Stock Tumult
The net worth of America’s households fell by a record $3.8 trillion at the end of 2018, pulled down by sharp declines on Wall Street that briefly pushed the market into bear territory, the Federal Reserve said Thursday.
The bracing news, part of the Federal Reserve’s latest Financial Accounts of the United States report, reveals just how deeply the market slide that began in October dug into Americans’ pockets.
At the time, uncertainty over the trade dispute between the U.S. and China and other segments of the economy stoked investor concerns that the Fed would ramp up its interest rate increases.
Americans’ net worth fell at the highest level since the financial crisis in the fourth quarter of 2018 as sliding stock market prices ate into the household balance sheet.
By the time the market began to recover in late December, household wealth had dropped to $104.3 trillion, a decline of 3.4 percent.
A chunk of that was attributed to the drop off in value of corporate equities, which fell by $4.6 trillion.
As bad as that was, the drop was offset somewhat by a $300 billion increase in real estate values, the report said.
Overall, financial assets totaled just over $85 trillion at the end of the year, while real estate value was $29.2 trillion.
The Federal Reserve said while all this was going on, household debt increased by an annual rate of 2.9 percent in the fourth quarter, while consumer credit grew at an annual rate of 6.2 percent and mortgage debt grew at an annual rate of 2.1 percent.
The Fed found that nonfinancial business debt, essentially debt owed on industrial or commercial loans, rose at an annual rate of 3.8 percent in the fourth quarter of 2018, though that was down from a 3.9 percent annual rate in the previous quarter.
Federal government debt increased 2.5 percent at an annual rate in the fourth quarter of 2018, down from a 6.8 percent annual rate in the previous quarter.
State and local government debt contracted at an annual rate of 2.2 percent in the fourth quarter of 2018, after contracting at an annual rate of 1.3 percent in the previous quarter.
If there is a silver lining to the report it’s that the stock market has largely recovered the value it lost during the last three months of 2018, meaning investors have largely recovered their end-of-year losses.
However that optimistic note is somewhat offset by the widespread cooling of the real estate market. According to zillow.com, the cooling of the housing market that started last year is now widespread, happening across 30 of the largest 35 metro areas.
In The News
This week the Centers for Disease Control and Prevention National Center for Health Statistics released data that the U.S. birth rate is the lowest it’s been since 1979, and one theory on why this is happening is younger individuals who are of childbearing-age are putting off... Read More
An official from the International Monetary Fund argued this week that the Middle East and Central Asia regions should shift towards a new and inclusive economic model as they emerge from the pandemic, echoing IMF claims that this is the time for a world economic shift. ... Read More
With the US unemployment rate essentially unchanged from March to April from 6.0% to 6.1% respectively, the American state of employment seems to continue on its positive track, according to the Bureau of Labor Statistics latest report. Employment in nonfarm jobs increased by 266,000 in April,... Read More
The Small Business Administration began accepting applications on Monday for the Restaurant Revitalization Fund, a program authorized in March by the passage of the American Rescue Plan Act. To receive funding, businesses must submit their application to the SBA on a first-come, first-served basis at restaurants.sba.gov.... Read More
WASHINGTON -- The Biden administration’s pledge to up the wages and fair labor standards of low-income workers hit a roadblock among Republicans during a congressional hearing Monday. The intentions are good but the economics are bad, according to critics who say the plan would backfire by... Read More
WASHINGTON (AP) — President Joe Biden's massive proposed spending on infrastructure, families and education will not fuel inflation because the plans would be phased in gradually over 10 years, Treasury Secretary Janet Yellen said Sunday. New economic reports have portrayed a surging recovery from the recession... Read More