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U.S. Household Net Worth Hits Highest Level Ever — Update

By Paul Kiernan 

WASHINGTON -- A resurgent stock market and fiscal stimulus propelled the net worth of U.S. households to the highest level ever in the second quarter, despite a record drop in the previous three months caused by an economic shock from the pandemic.

The net worth of American households and nonprofit organizations jumped 6.8% in the second quarter from the first, to $118.96 trillion. That is about $380 billion more than at the end of 2019, before the coronavirus pandemic wiped out more than $7 trillion of household wealth.

The figures, published in a quarterly Federal Reserve report known as Flow of Funds, illustrate the coronavirus's historic hit to the U.S. economy, followed by a swift start toward recovery.

Economists say the U.S. economy and labor market are recovering more quickly than expected from the downturn sparked by the pandemic and related lockdowns earlier this year. Business and academic economists polled recently by The Wall Street Journal expect gross domestic product to increase at an annualized rate of 23.9% in the third quarter, following a decline of 31.7% in the second quarter.

Household net worth consists of the difference between assets -- such as bank accounts, stock investments and real estate -- minus liabilities such as mortgage balances and consumer debt.

The component that was most severely affected by the pandemic was the value of corporate equities owned by households, which fell 25% in the first quarter from the end of 2019. But most of those losses were recouped in the second quarter, when the value of equities stood at $19.52 trillion -- or just 8.3% below their year-end level.

The S&P 500 fell more than 30% from mid-February to late-March as the spread of Covid-19 caused investors to panic. By mid-August, however, U.S. stocks had recovered those losses.

Household real estate and bank-account values have continued to rise, on the other hand, with the latter likely bolstered by stimulus checks and enhanced unemployment benefits during the second quarter. The personal saving rate -- the amount of households' after-tax income that isn't spent -- surged to a record 26% in the second quarter from 9.6% in the first.

"The fiscal stimulus that we've received so far has been really important in shoring up household balance sheets, and it was instrumental to the recovery in consumer spending that we've seen in the third quarter," said Blerina Uruçi, a U.S. economist at Barclays.

Most of the increase in debt amid the pandemic has occurred on business and government balance sheets, the Fed report showed. While the nonfinancial debt of households rose just 0.5% in the second quarter from the first, business debt climbed 14% and federal-government debt surged 59%.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

September 21, 2020 14:42 ET (18:42 GMT)

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