The wealth report
Date posted: October 25, 2010
Every six weeks or so the Federal Reserve releases a report on the wealth of U.S. households. Does the latest edition bring good news or bad? N.C. State University economist Mike Walden says a bit of both.
“It is mixed news. … This report — as you might expect, this is a big data collection effort — comes out with somewhat of a lag so the numbers we have are for the spring of this year. And of course what this report does is it looks at the value of our investments, the value of our debts and what is happening to both.
“The good news is that households continue to pay down on their debts. In fact, debt payments — reduced debt by about thirty five billion dollars in the spring. And overall consumers have reduced their debt by half a trillion dollars since the beginning of the recession — so that’s good. Also some good news, real estate values rose a little bit in the spring.
“But we did have some bad news. In the spring the stock market went down, so that pulled down financial assets. And the result what we call net worth, which is the deifference what people own and what they owe, actually went down by a little bit in the spring.
“So I think the bottom line here is to look at the trends, and I think the big trend that is really pushing a lot of things in the economy is the fact that households are now trying to undo some of what they did in the early part of the 2000s. That is, they took out a lot of loans — a lot of borrowing — and now given the changes in the economy households are having to pay down on those loans and save more, but this is resulting in a slower-growing economy.”
Category: Economic Perspective