Household finances took a big hit during the recession. N.C. State University economist Mike Walden takes a look at a new status report from the Federal Reserve on household assets, debt and net worth to determine if we are collectively making progress in getting our financial house back in order.
“We are …. And this is very important. Of course, the focus understandably so is on jobs, but household finances really did … take a big hit. And that’s been a factor behind the slow growth in the economy. So this report that we get from the Federal Reserve every three months is very important.
“So we just got one. It was for the last three months of last year. It does show improvement. For example, household assets gained. But I should say only financially, since we’ve not seen an improvement yet in real-estate assets.
“Interestingly, household debt, which had been going down as households have been working off their debt edged up a little bit — not a lot, but a little bit in the last three months of last year, probably due to Christmas. And what we saw is consumers take out a little more consumer credit. Some economists actually view this as good. More confidence by consumers to take on borrowing.
“Net worth, which is, of course, the difference between your asset values and your debt, went up a very robust 11% in the last three months of last year. And that’s much higher than it was at the low point in 2008. It’s still off, though, from the high point of 2007.
“So I think the bottom line from all this is that the … average household’s financial position is improving, but we still have, as we’ve said, for many parts of the economy a ways to go.”