View Full Version : U.S. Household Net Worth Fell Most on Record in Third Quarter

12-11-2008, 02:55 PM
U.S. Household Net Worth Fell Most on Record in Third Quarter
By Shobhana Chandra

Dec. 11 (Bloomberg) -- U.S. household wealth fell from July to September by the most on record as property values and stock prices tumbled, Federal Reserve figures showed.

Net worth (http://www.bloomberg.com/apps/quote?ticker=NWORCHNG%3AIND) for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952, to $56.5 trillion, according to the Fed’s quarterly Flow of Funds report today. Real-estate-related assets declined by $646.9 billion, following a $217.1 billion loss.

Combined with a loss of 1.9 million jobs so far this year, household balance sheets are in tatters, making it harder for Americans to borrow as banks restrict credit. President-elect Barack Obama has called for an economic-stimulus package of unprecedented size as the economy slides toward the longest recession in the postwar period.

“Households’ spending power is declining sharply,” John Lonski, chief economist at Moody’s Capital Markets Group in New York, said before the report. “Consumers are going to remain very unwilling to spend. It’s highly unlikely that the fundamentals of consumer spending will improve any time soon.”

Owners’ equity as a share (http://www.bloomberg.com/apps/quote?ticker=NWOROWNR%3AIND) of their total real-estate holdings dropped to a record-low 44.7 percent last quarter, from 46 percent in the second quarter.

Mortgage borrowing by households fell at a 2.4 percent annual pace, after decreasing at a 0.1 percent rate in the prior quarter, the Fed said.
Total borrowing by consumers, businesses and government agencies increased at an annual rate of 7.2 percent last quarter compared with a 3.1 percent gain the prior quarter. The increase was led by a jump in government borrowing.

Less Borrowing

Total borrowing by households fell at a 0.8 percent pace after rising 0.6 percent in the second quarter. Business borrowing climbed at an annual pace of 2.9 percent after rising 5.6 percent the prior quarter.
Borrowing by state and local governments increased at a 2.9 percent rate, the Fed said.

Federal government borrowing surged at an annual rate of 39 percent, more than six times as much as the prior quarter’s pace.

Job losses are making consumers more strapped for cash, and worsening the slowdown in consumer spending, which accounts for two-thirds of the economy.

A Labor Department report today showed the number of Americans filing first-time claims for unemployment benefits surged to 573,000 last week, a 26-year high, and the number of workers receiving benefits also jumped to the highest level since 1982.

To contact the reporter on this story: Shobhana Chandra (http://search.bloomberg.com/search?q=Shobhana+Chandra&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in Washington [email protected] ([email protected])

Last Updated: December 11, 2008 12:21 EST


12-11-2008, 05:44 PM
R.I.P. consumer economy.

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