The data is in and household net worth in the United States has risen for the 3rd straight quarter. This brought American household net worth to $54.2 trillion. That means we only need to increase household net worth by 21% more to reach the high-water mark of $65.9 trillion achieved during the bubble as excess housing inventory works itself off, new households are formed, and savings replenish the losses that were incurred during the crash.
An "Unequal" Recession
Depending upon where you fall in the economic spectrum you either believe it or not (the data doesn't lie, but some people are psychologically wired to overweight what they see in their own lives and ignore what is happening the next city over, for example). This has not been a so-called "equal" recession because the burden is falling more heavily on unskilled workers and those who are part of the working class more than knowledge workers. According to The Washington Post, unemployment among young African American men now stands at a staggering 34.5%.
For others, the story is much different. Two of my good friends, for example, are married to each other - she is a loan modification officer at a regional bank and he just graduated from college with a degree in engineering and a sub-specialty in nuclear energy (or something comparably technical). They both effectively paid their own way through school and now, in their mid-twenties, will have a household income that puts them in the top 10% of earners nationwide within twelve months after graduation. Technically speaking, they are at the bottom of their career ladder and will ultimately make far more money.
They are indicative of the type of family household causing the figure to rise. Why are they successful? They invested in skills that are in demand, are purposely in two different industries (lessening the household risk if one were to lose their job), and that are not easily replaced. They invested in themselves before investing in a portfolio. Now, all of those years of specialty training and education are paying off big.
(On a related note, education is a form of investing if done well. One of the biggest mistakes I people see is when they read "Investing for Beginners" they immediately think only stocks or bonds. Investing covers so much more than that. It includes actively choosing your income sources, real estate, small businesses, franchises ... don't be trapped in an artificial box because of what you see on television or read in magazines.)
Loan Modifications and Foreclosures Influences the Figures, As Well
Another reason the household net worth continues to increase is because homeowners are finally finishing foreclosure proceedings and the banks are writing off the debt but earning record profits to fill the hole. These record bank profits are caused by the Federal Reserve artificially depressing short-term interest rates so banks can earn the largest possible "spread" as they pay nothing on their deposits and loan the money out at higher rates. As I pointed out to my family members, though, the housing crisis isn't all bad because for every $1 lost in home value, that's $1 saved by the younger generation, which is forming households and purchasing property. It was, in effect, an inter-generational transfer of wealth. I warned you this was happening almost a year ago when I wrote about the news article showing that 20 and 30 year olds were using the crash to acquire assets at a record pace and distressed prices.
My guess is that 1-2 years from now, the entire mess will be behind us. We'll still be facing Federal deficits, but the economic pie will have continued to expand. Those in the low-skill sector will not have recovered unless they willingly move to new employment in a different industry (e.g., they train to become an electrician or a plumber, which cannot be outsourced).
Interesting how you analyze so”coldly” the facts and you end up touching on such socially relevant topics. Thanks for the analysis.