Households failed even to run in place during the April-June quarter as sinking stock prices eroded wealth. Stocks
have since recovered about two-thirds of those losses. But based on last quarter's data, household net worth would have to
surge 23 percent to reach its pre-recession peak.
Net worth — the value of assets such as homes and investments, minus debts such as mortgages and credit cards
— fell 2.7 percent, or $1.5 trillion, last quarter, the Federal Reserve announced Friday. It now stands at $53.5 trillion.
That's above the bottom hit during the recession, $48.8 trillion in the first quarter of 2009. But it's far below the
pre-recession peak in wealth of $65.8 trillion.
The drop from April to June was the first quarterly decline in Americans' wealth since early 2009. Before then, net
worth had risen slowly for four straight quarters.
Economists generally think household wealth has ticked up in the July-September quarter because of higher stock prices.
Yet given last quarter's setback and expectations of scant gains ahead, some economists have pushed back their forecast for
when Americans will regain all their lost wealth: not until the middle of this decade.
stagnant wealth probably will keep Americans from spending freely — and the struggling economy from picking up strength.
Consumers tend to spend according to how wealthy they feel. And their spending accounts for about 70 percent of the economy.
For now, people are saving more and paring debt, Friday's data showed.
The decline in net worth from April to June amounted to an average drop of $12,941 per household. Average household
wealth now amounts to $455,173. That's up from $415,185 during the recession. But it's down from a peak of $563,438 in 2007.
Real estate, faith are weak
One reason that economists foresee only slight gains in wealth is they expect real estate values to stay weak. Residential
real estate accounts for 32 percent of net worth; individual stocks make up 13 percent. The balance includes retirement accounts,
taxable mutual funds, bank accounts, bonds, and possessions such as cars and jewelry.
During the recession, sinking home equity and stock prices made shoppers skittish. More than a year after the recession
is thought to have ended, the housing and stock markets remain fragile. That's why most Americans aren't spending as much
as they typically do after recessions. Spending grew at an annual rate of
just 2 percent last quarter, about the same pace as in the first three months of this year. Most economists think Americans
will spend at about the same pace, or only slightly better, in the current quarter.
By contrast, after the 1981-82 recession, consumer spending averaged a robust 6.5 percent pace during 1983.
"Consumer spending is going to show only stunted growth this year because the wherewithal to spend — jobs, income,
wealth — are only inching higher," said Ken Mayland, president of ClearView Economics.
Another reason shoppers are unlikely to ramp up their spending: Their faith in the economy is sagging. Consumer confidence
dropped in September, according to the University of Michigan/Reuters' consumer sentiment index released
Carla Fehribach, a retired airport ticket agent in St. Louis, said the stock market's failure to generate any real
growth this year has made her more cautious about spending. "I'll feel a little more comfortable about spending more if the
stock market and the economy turn around," said Fehribach, 67.
Americans' home equity isn't making up for the loss in their stock values. Last quarter, U.S. real estate values ticked
up a scant 0.3 percent compared with the January-March period.
And many economists expect the home market to weaken further, especially because a federal home buyer tax credit has
expired. Most expect home prices to decline, on average, 5 percent to 10 percent by the middle of next year.
Stock gains aren't enough
Some optimism about stocks has been sparked by the gains they've made since June 30. The Standard & Poor's 500
index, a broad gauge of the market, has recovered most of its losses from the April-June period. That translates into modest
advances in wealth since the April-June period ended. For the year, stocks are up just under 1 percent.
Though the S&P 500 remains 28 percent below its peak on Oct. 9, 2007, employees who have stayed invested in 401(k)
plans and continued to contribute have fared better.
About 78 percent of them now have more money in those accounts than before the market top three years ago, according
to estimates by Jack VanDerhei of the Employee Benefit Research Institute.
Still, so many people have seen their overall wealth diminish since the recession that they lack confidence to spend
Scott Nieberg, a St. Louis veterinarian, says his retirement account is worth about what it was a decade ago. Nieberg,
53, says he has all but given up hope his nest egg will grow significantly anytime soon.
His business would have to improve significantly for him to feel comfortable enough to take a vacation, Nieberg said.
"In a down economy, you just work hard. We used to take vacations. Now, we take weekends."
AP writers Dave Carpenter in Chicago,
Alan Zibel and Christopher S. Rugaber in Washington and Christopher Leonard in St. Louis contributed to this report.