Americans' Net Worth Tanked In Second Quarter, Erasing This Year's Gains

Americans' net worth plunged in the second quarter of this year, new data from the Federal Reserve show, erasing the gains of the previous two quarters and adding evidence to the argument that the economy has entered a double-dip recession.

The net worth of households and non-profit organizations dropped $1.52 trillion during the period from April 1 to June 30 of this year, according to the report released Friday. The new figure, $53.50 trillion, represents a 2.8 percent decline from the previous quarter.

The net quarterly loss, the data suggests, came from Americans' losses in the sagging stock market. Equity shares owned by households and non-profits tanked in the second quarter, dropping $1.88 trillion or 11.2 percent to $14.87 trillion from the previous quarter. The second quarter figure went down past the territory of 2009's third quarter ($15.32 trillion), almost to the range of the 2009 second quarter ($13.06 trillion), when equity was just starting to rise from its low of $10.94 trillion in the first quarter of that year.

The Dow rose 4.1 percent in the first quarter of this year and fell 10.0 percent in the second quarter.

Total household wealth showed a 5.9 percent increase over the same period last year, which isn't saying much, since at that point the economy was only just beginning to improve. More significantly, Americans' net worth has approached levels not seen since the third quarter of 2009, when the total was $53.03 trillion, and when it was steadily increasing.

The overall value of assets owned by households and non-profits dropped as well, sliding $1.56 trillion or 2.3 percent, to $67.41 trillion from $68.97 trillion in the first quarter of this year. Again, the figure entered territory not seen since the third quarter of last year.

The economy has been in the slow process of deleveraging. Overall household debt dropped in the second quarter by a seasonally adjusted annual rate of 2.3 percent, with both mortgage debt and consumer credit debt falling. For households and non-profits combined, the values of mortgage debt and credit debt in the second quarter (respectively $10.15 trillion and $2.40 trillion) fell from the first quarter figures of $10.20 trillion and $2.42 trillion, respectively.

Mortgage debt for households and nonprofits has been steadily falling since the most recent peak of $10.50 trillion in the first quarter of 2009. And banks charged off 2.9 percent of all loans in the second quarter, according to data compiled by the Federal Reserve Bank of St. Louis. The charge-off rate this year is higher than any other year since at least 1988.

"Households are unable to pay off debt," Elizabeth Warren, President Barack Obama's newest top adviser on consumer and economic issues, said Friday during a conference call with reporters. "There's a substantial amount of debt written off."

In a tentative, and potentially outdated, cause for hope, the value of real estate assets owned by households in the quarter went up, a 0.3 percent increase over the previous quarter. Moreover, total tangible assets owned by households and non-profits increased in value 0.6 percent to $23.68 trillion. But the current housing situation, which has worsened since the end of June, suggests trouble.

"Looking ahead, the household net worth will move sideways as minor improvements on the financial side are likely to be offset by lower real estate asset values," Gregory Daco, an economist with IHS Global Insight, said in a release. "With employment recovering very gradually and housing prices remaining low, household wealth will make a very slow recovery."

Comments

[ntmessage]

08:48 AM on 09/21/2010

I would bet anything that government workers as a whole have been sheltered somewhat from the recession on the citizen’s nickel. In most places government workers make more money than others and get huge benefits on health care and pensions. They cannot continue to be sheltered from the recession. This includes teachers, etc. Today they have what most would call fringe benefits and the world has changed. They need to take a haircut in order for the government to afford to help more people. Not raise taxes.

[desertsapien]

12:11 PM on 09/20/2010

Just read the article on the "Recession is Over".

[Michael GE]

12:52 PM on 09/20/2010

Did that. While I am not in the position to dispute their reasoning within the limits of my knowledge and level of expertize, the first thought I had was a humorous, cynical reflection:

Couldn't US Navy have provided an aircraft carrier so these experts had a decent stage when declaring victory?

[SidelineBoy]

10:56 AM on 09/20/2010

This sort of micro-analysis is always made to just generate new 'eye-catching' headlines. Especially when they downplay the line that says that they're net worth had risen 5.9% since last year. I hate this sort of journalism, 'if it bleeds it leads, because it just feeds into an anger. The positive spin is that there is a 5.9% improvement. Why not focus on that? No, its not being too cheery or optimistic. Throw a dog a bone every once in a flipping while.

[oilfield]

10:47 AM on 09/20/2010

how much of a surprise can this be when the largest asset the middle class has/had is their house....and we all know that hasnt gone well lately.

[holyghostie]

07:09 AM on 09/20/2010

It could be worse:
http://www.nytimes.com/2010/09/18/business/18charts.html?_r=1&adxnnl=1&partner=rss&emc=rss&adxnnlx=1284980792-g56pFSZ8elem2DWHF3YvYA

[Memelogic]

04:09 AM on 09/20/2010

I saw a a report today that said the world’s HNWI (High Net Worth Individuals, defined as people owning liquid assets over $1M US) increased their total wealth by 18.9% to 39 trillion in assets in 2009. The report also said ultra-HNWIs (those with $30M or higher) were boosted by about 21.5%. The rich get richer.
http://www.us.capgemini.com/worldwealthreport2010/

[SidelineBoy]

10:59 AM on 09/20/2010

Even though I dig your populist tones, these are also the ones who had huge losses in their portfolios and benefitted from the bottom bump in stocks. These are also the ones that reflected the 2.8% loss in their values in the second quarter of this year. The rich might get richer, but not exactly how you pointed out.

[Michael GE]

01:04 AM on 09/20/2010

Sunday's Washington Post provided a case in point study which can provide a pause to those claiming that only less regulation creates jobs; about how the absence of regulation swallows up funds (in research, etc.) creating jobs almost everywhere around the globe but in the US.

Here's the link:
http://www.nytimes.com/2010/09/19/opinion/19friedman.html?th&emc=th

[oilfield]

10:46 AM on 09/20/2010

too expensive for r and d in the states compared to china....

[dadw5boys]

09:03 PM on 09/19/2010

This years Gain ?

There has been no gain except for the Uber Wealthy !!!!

[bethel1974]

08:01 PM on 09/19/2010

Deleveraging,foreclosure,bankruptcy,charge offs, it is all a cleansing process from the $2 trillion dollar ponzi scheme ran by the last administration. The money flowing through the economy was money loaned to the U.S. from China with 0% interest. As collateral the manufacturing sector of our economy was used. Only China had no intentions of giving it back nor taking a payment for the loan. The only way to overcome such a bone-headed decision is to take back your wealth. Forget wall street and start saving on your street. Clipping coupons,reducing household debt,cancelling credit cards,paying cash for things, this nickel and diming adds up in a 12 months time. We as a nation have the internal fortitude to progress through adversity and we will continue. No matter what nation rises up we always rise higher to competition and win. GO USA

[Dr Juan]

06:11 PM on 09/19/2010

"The economy has been in the slow process of deleveraging. Overall household debt dropped in the second quarter by a seasonally adjusted annual rate of 2.3 percent, with both mortgage debt and consumer credit debt falling."

Deleveraging? Nice way to sugar coat what are actually bankruptcies and foreclosures .

You know it is getting bad when the really really big players (Saudi, China...) are taking out their huge bank deposits in solid gold by the ton to store at home. Their message is they trust no currencies and expect major financial collapse. Financiers have sold more gold than actually exists - just like in fractional reserve banking where cash is created out of thin air, they have created gold out of thin air. And this will not "deleverage" until they collapse.

[TheCarCzarsPage]

08:02 PM on 09/19/2010

Just curious as to when you anticipate a more visible currency collapse and how will it manifest itself.

[Dr Juan]

01:11 AM on 09/20/2010

Try a digest of these sources:

Max Kaiser with Jim Willie:
http://maxkeiser.com/watch/on-the-edge/episode-71-17-september-2010-guest-jim-willie/

Max Kaiser with Steve Keen, second half of:
http://rt.com/About_Us/Programmes/Keiser_Report/2010-09-14/596575.html

Four episodes of Chris Martenson starting with:
http://www.youtube.com/watch?v=WeBtdwPpTQM&feature=channel

Reinforced by Max Kaiser with Nicole Foss, second half of:
http://rt.com/About_Us/Programmes/Keiser_Report/2010-09-17/597274.html

Scenario goes like this: Petroleum will be bought and sold with a currency basket which includes gold, not just US dollar. There will be a run on gold and those banks who have depositors withdrawing in gold will default. Things will likely get tougher and tougher over the next five years, first in European countries then hitting the US. US banks will have an earlier problem with commercial real estate foreclosures – probably after Christmas. While Cap and Trade is BS, we are all in a slow motion decline, transitioning to an economy and standard of living that can no longer be fed and sustained with cheap oil. and governments have not moved quickly enough to develop replacements - instead clinging to the status quo. As a non-economist MHO.

[totaldisbelief]

10:40 AM on 09/20/2010

have you factored in the gold plated tungsten bars?

[oped1961]

04:05 PM on 09/19/2010

Tyler Cowan in NYTimes today says Fed should cause inflation so we can't save money.
We will have to spend it or it will be worthless.
Time to go to the casino?

Already their low interest rate policy is costing savers billions and making bankers richer, June NYTimes sunday business

[WaveRhydr]

03:05 PM on 09/19/2010

There used to be some guy on TV decades ago who preached saving money. His tag line was "Saved money was more imporatnt than earned money". The logic being that one didnt pay taxes on what they saved. He wasnt talking about interest paid on bank accounts, of course.

For middle class Americans, learning to cook and eat well pays off big. Forget this nonsense about how we need to invest in the stock market. Invest in your family, and try a different approach.

[oped1961]

04:00 PM on 09/19/2010

I live next to Taco Bell, sad to see long line there every evening.
.

[cyclone70]

08:45 PM on 09/19/2010

you can eat cheaper at Taco bell off their value menu than you can at home

[Steve13133]

03:02 PM on 09/19/2010

Absolutely it did. Big government took any investment capital out there and spent it to prop up failed businesses. Brilliant! The USG should butt out of the ecomony and let it purge itself of all those malinvestments so it can begin to recover. They should also dump years worth of regulations that costs companies multiples of what they pay in wages in order to follow those regulations. There is no longer a level playing field for business in this country. Uncle Sam has tilted it in favor of foriegn lands. You could impose import duties, but that doesn't help us compete overseas. It only levels the field here. We drastically need to increase the export of our goods. The only way to do that is through tax policy and deregulation, because there is no such thing as a magic wand or a free lunch.

[helen]

06:33 PM on 09/19/2010

Years worth of regulations were dumped beginning with Glass-Steagall. See what that got us...

[WaveRhydr]

02:58 PM on 09/19/2010

Im going to suggest an "investment" that Americans can and should make that might pay off much better than their bogus stock picks. COOKWARE.

Buy quality cookware. Learn to use it. Its a one time investment, and make no mistake, its an investment that has significant start up costs. The benefits that one will reap in terms of savings, quality of family life and health quality are hard to imagine if you eat out often.

[Dr Juan]

05:56 PM on 09/19/2010

Just reading between your lines:
Are you saying none of us will be able to afford to eat out any more - things are that bad?
Or is the message "dump restaurant stocks"

[Kache]

06:51 PM on 09/19/2010

Do you know how many waitresses and cooks you're trying to unemploy??

[desertman]

12:38 PM on 09/19/2010

Relative economic, political and fiscal strength and stability are key supports for any currency, and the U.S. dollar increasingly is in trouble. The latest numbers show faltering economic activity and mounting criticism of the sitting government (weak presidential approval ratings often lead dollar weakness). Presumptions of ongoing economic "recovery" are vanishing, and fears are increasing as to what the federal government and the Federal Reserve will have to do in order to maintain systemic stability. -- John Williams shadowstats

[Steve13133]

03:05 PM on 09/19/2010

Overprinting of money by the Fed also leads to dollar weakness, directly. Government and it's regulations have to be cut down to size in order to free up rescources for investment and future priofitability. Either government butts out, or this economy is finished.

[helen]

06:34 PM on 09/19/2010

True, there has been lots of money printed. That I do not disagree about.

[Kache]

06:54 PM on 09/19/2010

Tell that to Hank Paulson. If he'd butted out on the night of Nov 15 2008 when he handed out the TARP you'd be eating your money now because it would be worthless.