In April the Federal Reserve Bank of San Francisco released a report showing that the overall net worth and value of financial assets had completely recovered from the financial collapse of 2008-2009. Since the low point of the recession in early 2009 the net worth of Americans has increased by a massive $14.7 trillion and financial assets have appreciated by $12.9 trillion.
As noted when the Fed report was released, the wealth recovery was very unevenly distributed since many people do not own stocks or have a meaningful amount of financial assets. For many Americans the bulk of their net worth is based on equity in their home and real estate values are still far below the peak values of 2006.
The Federal Reserve’s research also showed that the median net worth of Americans has declined substantially from 2005, indicating that the recovery in net worth was concentrated in the highest income groups that are the most likely to own a significant amount of financial assets.
A follow up study conducted by the Federal Reserve Bank of St. Louis and released today shows an even bleaker picture than the previous study. According to the St. Louis Fed, the wealth of Americans when adjusted for inflation, remains 55% below the peak reached during 2007. The bottom line is that even though a large amount of nominal net worth has been recovered since the depths of the recession, real net worth after adjusting for inflation remains collapsed. American households have effectively lost about half the purchasing power their assets had in 2007.
Admitting that the recovery in net wealth was misleading the St. Louis Fed report stated “Clearly, the 91% recovery of wealth losses portrayed by the aggregate nominal measure paints a different picture than the 45% recovery of wealth losses indicated by the average inflation-adjusted household measure. Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified.”
The report only confirms what many Americans already know. The recovery in net wealth has been concentrated in wealthy households that have significant holdings in financial assets. The important questions that no one in government or at the Fed is able to answer is how do we increase jobs, incomes and net worth for the average American family
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