Everyone may need extra cash as household wealth falls
It was recently announced that the recession is officially over, but that almost seems meaningless. Recessions technically end when economic contractions cease, but some things are still depressed, such as employment and household wealth. The wealth of a household, or net worth, is determined as assets minus debts. For instance, the value of a home a person or family owns or investments held are assets. The amount of debt a person or family holds in personal loans and credit cards are counted against assets. Whatever is left over is the wealth of a household. Net worth is almost at an all time low.
Household wealth plummeted
Household wealth has been on a roller coaster ride throughout the last couple of years. This summer was dismal, as household wealth over all fell through the floor. The Federal Reserve, according to CNN, recently reported that after all debts, the net worth among all Americans had dropped 2.8 percent. That amounted to $1.5 trillion of instant cash down the drain. Most of the evaporated value was held in stocks, mutual funds and retirement savings. Stocks on the open market were the hardest hit, as individual stocks lost $912 billion over the second quarter.
The little real estate market that could
Employment and housing are still the largest problem areas. Real estate, despite the bottom having practically fallen out, is slowly working its way back up. Real estate values have increased by $46 billion. However, this is an improvement of 0.3 percent. Overall, the real estate industry lost $17 trillion between mid 2007 to the end of 2009. It seems housing and employment are the areas that really need extra cash, but those statistics have not seemed to benefit at all from the cash advanced from stimulus programs.
However dismal the news seems, there is almost always a positive corollary. According to USA Today, stock markets have already begun to gain lost value back. A double dip recession doesn’t seem likely, as slow but steady recovery is expected.