Center for Household Financial Stability Releases First-Quarter Adjusted Household-Wealth Figures

ST. LOUIS — The Center for Household Financial Stability at the Federal Reserve Bank of St. Louis on June 6, 2013, released a report indicating that the average U.S. household has recovered only 62.8 percent of the wealth it lost during the recession.

The Federal Reserve Board’s release of Financial Accounts for the United States (formerly Flow of Funds Accounts) on the same day reported that 114.3 percent of total household wealth lost during the recession had been recovered by the end of the first quarter of 2013. William Emmons, chief economist for the center, and Bryan Noeth, policy analyst for the center, adjusted that figure for inflation and population growth to show that the recovery reality is not as bright in terms of purchasing power for the average family.

Emmons and Noeth reported their findings in the June 6 edition of In the Balance, the center’s publication series on household-balance-sheet trends.

Commenting on first-quarter trends, Emmons pointed out that, in line with recent quarters, 63 percent of the $3 trillion increase in wealth over the first quarter of the year came from stock holdings, which are mostly concentrated in a small number of families. Another 28 percent of the $3 trillion increase in wealth came in the form of gains in homeowners’ equity (that is, the value of housing minus mortgage debt).  The first-quarter increase in homeowners’ equity was $837 billion in current dollars.  After adjusting for inflation and growth in the number of households, the first-quarter gain in net housing wealth was the second-largest ever recorded, trailing only the first quarter of 2005.

The center’s report June 6 that average inflation-adjusted household wealth had rebounded 62.8 percent from the low point in the first quarter of 2009 compares to last quarter’s figure of 45 percent, which was based on data through the end of 2012.

Despite the improvement, according to Emmons and Noeth, most families are still climbing their way back up from the recession’s trough.

“Overall, the first-quarter wealth numbers are consistent with our conclusion from earlier research,” said Emmons.  “The average household still has a long way to go to restore the wealth lost during the recession.”

For a copy of the edition of In the Balance that contains the findings, go to stlouisfed.org/hfs.