Americans' Net Worth Shrinks $1.33 Trillion In 1Q

Yahoo! Finance:

WASHINGTON (AP) -- American households lost $1.33 trillion of their wealth in the first three months of the year as the recession took a bite out of stock portfolios and dragged down home prices.

The Federal Reserve reported Thursday that household net worth fell to $50.38 trillion in the January-March quarter, the lowest level since the third quarter of 2004. The first-quarter figure marked a decline of 2.6 percent, or $1.33 trillion, from the final quarter of 2008.

Net worth represents total assets such as homes and checking accounts, minus liabilities like mortgages and credit card debt.

The damage to wealth in the first quarter came from the sinking stock market. The value of Americans' stock holdings dropped 5.8 percent from the final quarter of last year.

Another hit came from falling house prices. The value of household real-estate holdings fell 2.4 percent. Collectively, homeowners had 41.4 percent equity in their homes in the first quarter. That was down from 42.9 percent in the fourth quarter.

The latest snapshot of Americans' balance sheets was contained in the Fed's quarterly report called the flow of funds.

Despite the drop, the speed at which net worth shrunk slowed to start the year. During the recession's deepest point in the October-December period, Americans' net worth fell 8.6 percent, according to revised figures.

With wealth declining and unemployment rising, there are questions about how consumers -- the lifeblood of the economy -- will behave in the coming months.

If they continue to spend, even at a subdued pace, the recession likely will end this year as predicted by Fed Chairman Ben Bernanke and other economists. However, if consumers hunker down and cut spending again, that could delay any recovery. In the final quarter of last year, Americans slashed spending at an annualized rate of 4.3 percent, the most in 28 years.

Still, there was some encouraging news on consumer spending Thursday.

Retail sales rose 0.5 percent in May, following two straight monthly declines, the Commerce Department reported. Meanwhile, the number of newly laid-off workers filing for unemployment benefits fell last week by 24,000 to 601,000, the lowest level since late January

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Comments

[5hy56]

Take back the trillions of $$$ given to the banks, who just sit on it and make it totally ineffective then start government incentive to create realistic industries that give employment and generate real productive income, some of which would hopefully be from exports.

Every other country, especially China and most of Europe have goverment incentives to protect it's industries. No matter what you call it it's a form of protectionism and its inevitable. We should stop being naive and take care of our own house. The only ones who win if we don't are the multinational corporations who don't care where they get their hand out.

good articles for a slow news day: http://www.bit.ly/12t.ly/12NCJR>Econ & Finance Articles Updated Daily

[5hy56]

The recovery is a forest. People have let their credit cards go, and don"t have mortgage payments it looks as if we are spending more and people have disposable incomes again. Actually, savings are getting drained and there are no new jobs. We are in the calm before the storm. People are spending what every little cash they have left on eating out and shopping for smaller ticket items. This will come to an end in 6 months. There are no new jobs. Can you hear the quiet in America?

hat tip to http://short.ie/g264dk/g264dk">E for providing good finance and economics articles

[FreedomCorpse]

The Federal Reserve has done massive damage to the US with easy money policies and politicians signoff on outsourcing manufacturing. The "Audacity of Hope" is like barking at the moon in the face of the economic ignorance and corruption of politicians who care not for the well being the country they are supposed to serve.

[illusionpainter]

The answer is a no brainer. Americans keep buying more and more foreign products and putting U.S. companies out of business. A lot of Americans want to see unions go away because they have been brainwashed to think unions are bad when in actuality they are assisting the worker, increasing your wages instead of lining the pockets further of the CEO's and Exec's, health and safety rules for your benefit and fairness in the workplace. The government is not enforcing the trade laws that are already on the book. According to WTO their are $4.3 TRILLION owed in fines by other countries to us for breaking laws and TRADE DUMPING.

Keep shopping at Wal-Mart and other China promoters. Keep buying Toyota's, Honda's, Nissan's, etc.... AND THEN DON'T COMPLAIN WHEN YOUR JOB GOES AWAY OR YOUR WAGES DECREASE!!!!!!

[Lorianne]

Paper loses, bubble losses

[ditraiano]

Obamanomics

[Blueline]

~Bush chants as he rolls over to jack off to oil profits~

[5hy56]

The market just doesn't seem to care. No one cares about financial institution corruption, bad banks, recession, job loss, hyperinflation. It's just buy buy buy, Thanks to automation technology, outsourcing, in sourcing, free market capitalism­/globaliza­tion, jobless recoveries are inevitable, sadly, for all future recessions. I predict baseline unemployment will rise from the historical average of 4-5& to 7-8% within the next decade, but the stock market & GDP will keep rising. Higher unemployment will be the new normal. Stocks that benefit from this phase shift are multinationals, high tech, and commodity.

one of my new favorite finance websites: http://lin.cr/qj4.cr/qj4 ">Econ & Finance Articles Updated Daily

Politicians will do noting to impede this transition because they lack the power to restrain hypercapitalism, and because they are often paid off.

[jerrypl]

Should any of us be surprised over the fall of the wealth of struggling working Americans? President Obuma has done nothing to control the financial theft upon the American people. He has allowed the thieves to continue to amass trillions of taxpayer's wealth into their hands through their bailouts and Fed Fund window giveaways. Congress has done nothing to stop the losses of home depreciation, foreclosure, job losses, or demanded that corporate off shore deadbeats pay their fair share. They focus on minor issues for the most part.

http://eye-on-washington.blogspot.com

[sc92705]

Obama has moved on to the next item of his agenda: healthcare.

He is blind and indifferent to spiraling unemployment and foreclosures. He refuses to let these small problems get in the way of his agenda items.

[TeeLolly]

His finance guys, particularly Summers and Geithner, are a big part of the problem. They're living in the same world as the Wall Streeters and business CEOs who walked away from their own failures with pockets full of cash. Summers and Geithner are clueless when it comes to the average person who lost a job or a home (OK, Geithner can't sell his million-dollar-plus home right now, but is renting it for a tidy sum), and refuse to connect the dots between lost jobs and homes, and all the money being funneled to guys who don't need a penny to live better than just about everyone else.

[allnightmarelong]

That picture looks like my bank account!

[MsIrisMG]

Good. It's time people embraced simple living rather than implode on their own greed and consumption.

[sc92705]

Thanks for your wisdom, you stupid biddy.

[TeeLolly]

Those most guilty of greed and excessive consumption are not the ones suffering the most. The greediest ones of all brought on the current economic crisis, and a lot of them are walking away with huge bonuses in return for their selfish folly.

[SamKnause]

It appears from you comment that you know nothing about anything that is happening in this country.

[urweatherman]

On the contrary, Iris is right....i­f every oversized house did not have 5 TV's, 3 IPODs, 2 SUV's mostly purchased with credit....­.maybe most of the greedy ones would not be so wealthy.. Sometimes learning must start within the individual family!

[Lorianne]

Agreed. Gone is living beyond one's means on credit and bubble equity.

[aintnogod]

Yes, but Americans can't be expected to continue to spend beyond their means unless Americans are as empty headed and illiterate as some of us oldsters fear they are. In short, we can't expect for spending to jump back to the credit card busting days. My wife and I bought a condo in December 2008, but its total cost to us is less than 25% of our income. We don't have credit card debt. We drive fuel efficient, small cars and we never spend more than 10,000 dollars, even new, on any car we buy. If all Americans would just spend wisely and become literate about economic issues, we can have a modest recovery that keeps on recovering. But you got to be able to read complex articles and follow close reasoned arguments to understand the issues. How many readers are out there reading through complex lengthy articles that tax and strengthen one's mental powers, one's ability to reason wisely?

[SamKnause]

You miss the point entirely. We were robbed in broad daylight and our government allowed it to happen and bailed out the culprits. People who didn't spend beyond their means have still lost equity in their homes, IRA's, 401 K's, etc. What does that have to do with living within your means?

[Lorianne]

Bubble equity, bubble profits.
Leveraged 'wealth'.
It was not sustainable.
Much of it was never real wealth in the first place

[Lavafalls]

Lorianne I'm a Fan of Lorianne permalink

Paper wealth
Bubble wealth.

I don"t think Americans have lost real wealth, but we are conditioned to think of fantasy paper wealth as real wealth.
==================
What about all the 401k's that have lost over 1/2 their value? Those who have been investing real dollars for their retirement have not only lost huge sums, many are too old to start over.

[Dredd]

What ever happened to NO GOVERNMENT TAKING without just compensation?

Did Bush II get rid of that too?

http://blogdredd.blogspot.com/2009/06/terrorism-we-can-believe-in.html

[Lavafalls]

That has nothing to do with the government, and it's your blog. Don't you know what you wrote?

[desertman]

Our government made the decision to convert individual ARMs to a national ARM with the likelihood of achieving the same end result... national bankruptcy.