Americans’ net worth up for third straight quarter

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Americans regained more of their shrunken wealth last quarter, mainly because the healing economy boosted stock portfolios. But the gain was less than in the previous two quarters.

The Federal Reserve reported Thursday that household net worth rose 1.3% in the fourth quarter to $54.2 trillion. It marked the third straight quarter of gains. Net worth had risen by a stronger 4.5% in the second quarter of 2009 and by an even faster 5.5% in the third quarter.

Net worth is the value of assets such as homes, checking accounts and investments minus debts such as mortgages and credit cards.

Even with the gain, Americans’ net worth would have to rise an additional 21% just to get back to its pre-recession peak of $65.9 trillion. That shows the vast loss of wealth people have suffered from the worst downturn since the 1930s.

Growth in stock portfolios delivered the biggest lift to net worth in the October-to-December period. The value of stocks rose by nearly 4% to $7.7 trillion. Higher home prices helped a bit. The value of real-estate holdings edged up 0.2%.

During the recession, which began in December 2007, household net worth plunged as low as $48.5 trillion in the first quarter of 2009. Stock holdings and home values nose-dived. As their net worth evaporated, Americans felt less inclined to spend.

For all of last year, consumer spending dropped 0.6%. This year, as wealth, the economy and financial conditions slowly recover, consumer spending is projected to grow around 2.2%, according to the National Assn. for Business Economics.

By contrast, in 1983, when the economy was recovering from the 1981-82 recession, consumer spending surged 5.7%. Unlike past rebounds led by ordinary shoppers, this one so far has been driven more by spending from businesses, foreigners and — until it runs out — government stimulus. Consumers have been spending more lately. But they remain cautious.

Those invested in the stock market benefited most in the fourth quarter. The Standard & Poor’s 500, a broad barometer of stocks, climbed 5% in the quarter. The Dow Jones industrial average gained 7%.

But the gains have slowed so far this year. The two indexes have risen just 2% and 1%, respectively. Even with the market’s rally, the S&P 500 is still 27% off its October 2007 peak.

Holders of 401(k) retirement accounts have recovered somewhat from the walloping they took in the meltdown. But even with continued contributions to those accounts, many are still struggling. According to the Employee Benefit Research Institute, average account balances for 401(k) contributors ages 45 and older remained 2% to 3% lower at the end of December than at the end of 2007.

For all of 2009, net worth grew by $2.8 trillion, the largest annual gain since 2006 — before the recession hit.

-- Associated Press