The Nation's Wealth Recovery Since 2009 Conceals Vastly Different Balance-Sheet Realities among America's Families

William R. Emmons , Bryan J. Noeth

The recently launched Center for Household Financial Stability at the Federal Reserve Bank of St. Louis focuses on family balance sheets. The center's researchers study the determinants of healthy family balance sheets, their links to the broader economy and new ideas to improve them. The center's original research and publications, public events and web-based data tools support researchers, practitioners and policy-makers seeking to rebuild and strengthen the balance sheets of all American households, but especially those harmed by recent economic and financial shocks. For more information, see the center's web site at

According to the Federal Reserve's Flow of Funds Accounts (FFA)[1], the aggregate net worth (or wealth, equal to total assets minus total liabilities) of America's households had returned by the end of 2012 almost to its precrisis peak in nominal terms and to about 88 percent of its precrisis peak when adjusted for inflation. Accounting for inflation and growth in the number of households, average net worth had recovered to 84 percent of its precrisis peak. (See rows 1, 2 and 3 in the table, respectively).

The aggregated wealth data conceal an enormous diversity of experiences among different types of families. Combining household-level Survey of Consumer Finances data[2] for 2010 with quarterly FFA data and annual data from the Census Bureau, we estimated quarterly balance sheets for 18 groups of families divided along the dimensions of age, educational attainment, and race or ethnicity through the end of 2012.[3] At one extreme, the average family headed by someone who is white or Asian, is between 40 and 61 years old, and has a two- or four-year college degree - a group comprising about 15.5 percent of all families in 2012 but controlling 37.5 percent of all wealth - had recovered all but 2 percent of the financial losses suffered during the financial crisis, even after adjusting for inflation (row 4). Older (62 years or more), white or Asian college graduates - representing 15.1 percent of families and 30.2 percent of wealth - had recovered to about 84 percent of their 2007 level, close to the overall average (see row 5). Other college-educated groups had recovered somewhat less by the end of 2012 (rows 6 and 7).

At the other extreme, young families (under 40) generally suffered large wealth declines during the downturn and, in some groups, have continued to suffer during the economic recovery. The average wealth of young African-American or Hispanic college graduates at the end of 2012 was only 31 percent of its corresponding precrisis level (row 8). The average young white or Asian family whose head did not finish high school fared even worse; at the end of 2012, it had only about 21 percent of the wealth that the average comparable family had in 2007 (row 9).

Thus, the headline figure suggesting almost complete recovery of household wealth from its depressed level of a few years ago is misleading in the sense that it does not correspond to the experiences of all families.

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