Financial crisis has left average US household 40% poorer
The financial crisis and collapse in US house prices has left the average household in the States 40% less well-off, a Federal Reserve study has said.
Some 18 years of gains have been wiped out between 2007 and 2010 for the average US household, with net worth down 38.8% to $77,300 from $126,400.
The reading is now at its lowest level since 1992, the Fed said in its Survey of Consumer Finances.
Mean net worth fell 14.7% to a nine-year low of $498,800, from $584,600, the central bank added.
“Although declines in the value of financial assets or businesses were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices,” the Fed economists wrote.
Declines in household wealth has stifled consumer spending which makes up about 70% of the economy, with almost every demographic group experiencing losses in the what has been the longest and deepest recession since the Great Depression, Fed economists added.
Chairman of the Federal Reserve, Ben Bernanke will meet with Fed policy makers next week to consider whether the central bank needs to add to its record stimulus after employment grew at the slowest pace in a year in May.
The jobless rate has stayed above 8% since February 2009, compared with the central bank’s long-term goal of 4.9% to 6%, despite efforts from the Fed to cut key interest rates to almost zero and to purchase $2.3trn in debt to lower long-term borrowing costs.
This article was first published on Investment Week