Americans Have Only Recovered How Much Wealth Since Recession?

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Remember March? The Dow Jones Industrial Average set a new record, surpassing its pre-crisis heights for the first time, and the Federal Reserve released a report calculating that "Americans as a whole had regained 91 percent of their losses" from the Great Recession.

Just kidding about that second thing, I guess, because on Thursday the St. Louis Fed's new Center for Household Financial Stability said that, in fact, "Average household wealth in real terms, contrary to recent headlines, has not fully recovered; indeed it is only about halfway back to prerecession levels."

By which they mean less than halfway back: The average household is still only 45 percent as wealthy as it was before the crash, according to the data.

How can there be such a disparity between the two reports, just a few months apart? It seems the first conclusion took into account neither inflation nor population growth. So even though, by the last quarter of 2012, Americans had regained $14.7 trillion of the $16 trillion lost to the recession, the number of U.S. households increased by 3.8 million during the same period. And inflation, though it has averaged a modest two percent over the past five years, hasn't helped either. More people dividing up wealth with even slightly less purchasing power leads to a significantly dimmer economic picture.

And of course the recovery has been far from egalitarian. $9.1 trillion of the $14.7 trillion recovery -- 62 percent -- was due to higher stock-market wealth. "Stock wealth is unevenly held," the authors explain, "with the vast majority of stocks owned by a relatively small number of wealthy families. Thus, most families have recovered much less than the average amount." For another perspective on our unequal, stock market-driven recovery, see a recent study by Pew which found that from 2009 to 2011, the mean net worth of the top seven percent of households grew by 28 percent, while the lower 93 percent lost four percent of their average wealth.

Home values, not stocks, are the lion's share of wealth for middle- and lower-income households, and home prices are still down about 30 percent, "even after jumping nearly 11 percent in the past year," the new report says. Those who had higher-than-average concentrations of their wealth in housing -- younger, less-educated, African-American and Hispanic families -- took the biggest hit in percentage terms; these groups were also more vulnerable because of higher debt-to-asset ratios.

The report explains that damage to household balance sheets carries ominous implications for college outcomes, economic mobility, financial stability, and consumer spending. But since the wealthy do spend somewhat disproportionately -- roughly speaking, 40 percent of U.S. spending is done by 20 percent of Americans -- higher stock prices should lead to increased consumption.