U.S. Household Net Worth Grew To $42.05 Trillion in 3Q

[charrison]

linkage

U.S. households saw their total net worth rise 1.4% to $42.05 trillion in the third quarter of 2003, the Federal Reserve said Thursday.

The Fed's quarterly "flow of funds" data also showed that U.S. nonfinancial debt grew at a 7.4% rate in the third quarter. This was down from a revised 11.1% in the second quarter, first reported as a 12% growth rate.




"The slowdown in debt growth was distributed broadly across all of the major sectors in the United States, but was most pronounced for the federal government sector," the Fed said. Nonfinancial debt includes borrowing by all sectors of the economy except banks, thrifts, finance company and other financial service providers.

Household net worth rose for the fourth consecutive quarter. The $42.05 trillion posted in the most recent quarter shows that net worth is rising back toward the peak of $42.26 trillion set in 1999.

Household net worth is a measure of total assets, such as houses and pensions, minus total liabilities, such as mortgages and credit-card debt. In the second quarter, net worth stood at $41.47 trillion, revised up from a previous estimate of $41.25 trillion.

 

[Bowfinger]

I think this information would be more meaningful if it was expressed on a per-household basis and was adjusted for inflation. It would also be informative to correlate this with differeing levels of wealth, e.g., is it 1.4% across the board, or is it up 7% for millionaires and down 3% for lower middle class?

 

[charrison]

Originally posted by: Bowfinger
I think this information would be more meaningful if it was expressed on a per-household basis and was adjusted for inflation. It would also be informative to correlate this with differeing levels of wealth, e.g., is it 1.4% across the board, or is it up 7% for millionaires and down 3% for lower middle class?

How can that be?

It might have been Ross Perot who first used the expression that America is turning into a nation of "hamburger flippers," in reference to the decline in good paying manufacturing jobs replaced by low-pay service sector jobs.


Here's my question: If millions of high-paying jobs are leaving the country only to be replaced by millions of low-paying jobs, what prediction would you make about the trend in our standard of living? It would have to be in steep decline, but the facts don't square with that. Per capita GDP, the population divided into the value of goods and services produced, is one of the methods used to gauge the standard of living. The historical trend, including today, is a rising American standard of living. In fact, our per capita GDP in 1980 was $21,500 and, as of 2002, it was $36,000 -- a 59 percent increase. So how can it be that we're becoming a nation of low-pay hamburger flippers?

...

According to the 1995 Annual Report of the Federal Reserve Bank of Dallas, only 5 percent of those in the bottom 20 percent category of income earners in 1975 were still there in 1991. What happened to them? A majority made it to the top 60 percent of the income distribution -- middle class or better -- over that 16-year span. Almost 29 percent of them rose to the top 20 percent.

The evidence suggests that low income is largely a transitory experience for those willing to work. There's no mystery to it: As a function of age, people get wiser and gain more experience. That means it's not very intelligent to think one can make meaningful statements about poverty simply by measuring income at a particular point in time. By the way, people are also mobile downward, as suggested by the joke that the easiest way to become a Texas millionaire is to start out as a Texas billionaire.

 

[dirtboy]

C'mon Char, this must be a bogus report. Don't you know that we're in a depression, debt is at a all time high and that the sky could fall any day now?! 😉

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Bowfinger
I think this information would be more meaningful if it was expressed on a per-household basis and was adjusted for inflation. It would also be informative to correlate this with differeing levels of wealth, e.g., is it 1.4% across the board, or is it up 7% for millionaires and down 3% for lower middle class?

How can that be?

I'm missing your point. My intent was not to attack your article, it was to better understand its significance and context.

 

[charrison]

Originally posted by: Bowfinger

Originally posted by: charrison

Originally posted by: Bowfinger
I think this information would be more meaningful if it was expressed on a per-household basis and was adjusted for inflation. It would also be informative to correlate this with differeing levels of wealth, e.g., is it 1.4% across the board, or is it up 7% for millionaires and down 3% for lower middle class?

How can that be?

I'm missing your point. My intent was not to attack your article, it was to better understand its significance and context.

The point of the article
1. wages are not suffering
2. the poor do not stay poor
3. Even the poor here are well off
4. The rich dont stay rich either

 

[Bowfinger]

Originally posted by: charrison

Originally posted by: Bowfinger
I'm missing your point. My intent was not to attack your article, it was to better understand its significance and context.

The point of the article
1. wages are not suffering
2. the poor do not stay poor
3. Even the poor here are well off
4. The rich dont stay rich either

OK.

Separate from that, I think the household net worth statistics would be more meaningful if they were expressed on a per-household basis and were adjusted for inflation. It would also be informative to correlate this with differing levels of wealth, e.g., is it 1.4% across the board, or is it up 7% for millionaires and down 3% for lower middle class? This would help me to better understand its significance and context.


Edit: typo

 

[BaliBabyDoc]

Well my bankruptcy lawyer relatives still say business is brisk from car dealers down to laid off factory workers. This article did not address Bowfinger's query and neither did Walter Williams' article. In all likelihood, the loss of manufacturing and retail jobs in say Washington state since Jan 2001 is barely a blip in household net worth b/c Bill lives there. Low and middle income people that lost jobs are piling up debt but anyone with a job (and equity investments . . . like Bill) probably had a decent year in 2003.

The majority of Williams' figures are outdated and his conclusions are not substantiated by his evidence. Well-paying jobs with good benefits are indeed being replaced by service economy jobs (nurse aid, retail, etc). But wealth gains (particularly in bull markets) at the top can easily offset job losses or downwards mobility.

1. wages are not suffering

Williams cites a 1995 report about upwards wage mobility from 1975 to 1991.

2. the poor do not stay poor

Williams bases this conclusion on the same report.

3. Even the poor here are well off

Williams argues that having a trailer home (with negative equity), window A/C (with high utility bills), a color TV, cable/satellite service, and a cellphone means poor people are doing well. It's a ridiculous conclusion b/c their home is likely worthless and the rest of the items he mentioned are substantial drains on income which essentially prohibit these families from accumulating wealth . . . albeit the harm is largely self-inflicted.

The typical poor American (according to Williams) lives in a home that's larger than the typical non-poor person in London, Vienna, or Paris . . . duh. Apparently common sense didn't accompany Williams' three degrees in economics. The typical poor Texan likely lives in a home larger than the typical non-poor person in SF, NYC, and Boston but that's not evidence that poor people are doing well. It's a better indicator of expensive real estate. But a poor person in the EU (good countries not podunk like Spain) has universal healthcare while the working poor in America (non-Medicaid eligible or in the case of TX encouraged not to apply) are one major illness away from being destitute.

4. The rich dont stay rich either

Well regression towards the mean rarely takes a vacation. But let's be reasonable. The only real evidence for this tidbit is a joke in that article about wealthy Texans.

Here's Williams' roadmap out of poverty: Complete high school; get a job, any kind of a job; get married before having children; and be a law-abiding citizen. Among both black and white Americans so described, the poverty rate is in the single digits.

Any kind of job? Right! Actually better advice would be to not have children at all . . . particularly if you are low income regardless of marital state. That law abiding citizen part is laughable in America. I would say be a law-abiding citizen for personal/moral reasons but if you are going to break the law . . . hide the evidence and don't hire women . . . they can't keep secrets 😉 or maybe they're just more honest.