More wealth gains

Date posted: July 22, 2013

The Federal Reserve recently released the new wealth numbers for households through the first three months of this year. N.C. State University economist Mike Walden explains what the figures show.

“And … I always focus on these numbers because – although of course most people look at the job numbers every month they come out; that’s very important – the wealth numbers, I think, are also very, very important.

“I think they’re really different this time in terms of what they meant for the recession. Specifically, we had a massive, massive decline in household wealth during the recession. I think it’s really met the major reason why this recession’s so deep and why it’s been so difficult to recover from.

“But that all said, the latest numbers we have from the Federal Reserve on household wealth are very positive, (which) continues the trend that we’ve seen over the last couple of years of household wealth going up.

“Of course, again, household wealth is the difference between the value of assets that people own, the financial assets, their home assets, minus the value of their debt.

“And we’re seeing this improvement on both ends of that equation. We’re seeing that both financial wealth and real estate wealth have been going up and that also … over time, household liabilities – household debt – going down.

“Now on that last point, there has been a recent change over the last year. People are beginning to borrow more. And so the movement in household wealth up is primarily being caused by asset values going up. And I wouldn’t necessarily look at … that increased borrowing as being bad; I think it’s more indicative of a better-financed household and a household that is more optimistic about the economic future.”

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