Changes in household wealth have been a key part of the economic roller coaster the last few years. Recently we received the latest reading on household wealth, and N.C. State University economist Mike Walden says the numbers are encouraging.
“This is a big deal. I don’t think many people appreciate how important wealth is. People obviously focus on jobs, their income. Wealth is sort of in the background running, but it’s actually been a very key part of what happened during the recession, when wealth took a battering. Household wealth dropped $10 trillion – a 15 percent decline. And that really, I think, … sums up why the recession has been so bad and why the recovery has been slow is households have tried to recover that wealth.
“Well, the good news is that wealth continues to move up. Household wealth continues to move up. In fac,t the latest reading we have for the third quarter of 2012 showed that it was 10 percent above where it was the previous year, and currently it is only 2 percent below pre-recessionary levels.
“Now how did the wealth recover? Well, a combination: First of all, households have been very diligent about paying down on debt – paid down over a trillion dollars of debt in the last five years. And we have seen recovery in the financial markets – the stock market, for example, but other markets – and very importantly, recently real-estate values have begun to come back.
“So, I think this is a very key part of our economic outlook for 2013: To the extent that households feel wealthier and realize they’re wealthier, that’s going to help them spend more. And that’s going to propel the economy.”