As debt rises, wealth leveling off
WASHINGTON -- The wealth of US families barely grew from 2001 to 2004 as the economy emerged from the first recession in a decade and consumers took on more debt, a Federal Reserve report showed.
Median net worth, the difference between household assets and liabilities, rose 1.5 percent to $93,100 during the survey period, down from a 10.3 percent gain from 1998 to 2001, according to a Fed report released in Washington yesterday. Net worth fell for the bottom 40 percent of US families.
''It's discouraging," said Stephen Brobeck, the executive director of the Consumer Federation of America. ''What we see is little change in the assets of the typical American household between 2001 and 2004, after substantial increases in the previous six years."
The survey of 4,000 households, which the Fed conducts every three years, reflected a postrecession economy that expanded slowly, then gathered pace. Economic growth climbed from 1.6 percent in 2002 to 4.2 percent in 2004, while a loss of 535,000 jobs turned into a gain of more than 2 million positions. The recession lasted from March to November 2001.
Rising mortgage debt was the main reason growth of net wealth slowed during the survey period. The average housing debt jumped 27 percent to $124,100, and the share of families with mortgages rose to about 48 percent in 2004 from 45 percent three years before. Other debt, including for credit cards and installment loans, also rose. That meant more family assets were offset by debt in 2004 than in 2001.
''The increase in debt is holding down the net worth growth," said William Gale, an economist with the Brookings Institution, a research group in Washington.
The share of families that held stocks either directly or through a retirement plan fell to 49 percent in 2004 from a high of 52 percent three years earlier, the report showed. Among families that owned stocks directly, the median value of their holdings fell 30 percent, to $15,000 from $21,300 in 2001.
The Standard & Poor's 500, a benchmark for many mutual funds, fell for three straight years from 2000 to 2002.