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Americans' Net Worth Has Recovered to Pre-COVID Levels: Fed

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Federal Reserve Chairman Jerome Powell Federal Reserve Chairman Jerome Powell. (Photo: Bloomberg)

The net worth of American households recovered to pre-pandemic levels in the second quarter, according to the Federal Reserve. 

Their total net worth rose to $119 trillion in the second quarter as assets jumped to $135 trillion — the same levels that had prevailed in the fourth quarter — as investments in stocks and real estate increased gained more than $7 trillion in value from the first quarter, according to the Fed’s latest report on Americans’ financial accounts.

Households’ equity holdings grew by $5.7 trillion as the stock market recovered almost all its first-quarter losses, while the value of their real estate gained $500 billion.

At the same time, household debt increased just slightly, at a 0.5% annual rate, the lowest quarterly increase for at least two years, as mortgage debt increased at an annual 3% rate while consumer credit shrank by a 6.6% annual rate. 

A less rosy picture about the health of U.S. households emerged from another Fed report, released a few days earlier and from Tuesday’s congressional testimony by Fed Chairman Jerome Powell.

The Fed’s report on the Economic Well-Being of U.S. Households, based on a survey of several thousand adults in July, showed that 22% of adults who had been laid off during the pandemic were no longer employed and didn’t expect to return to their old jobs, up from 7% in April. 

About one-quarter of laid-off workers with family incomes under $40,000 reported they had returned to their earlier job compared with 40% of laid-off workers with family incomes over $100,000. 

Financial assistance programs helped families suffering from job loss or pay cuts. Nearly one in four adults said they had received assistance from unemployment insurance, the Supplemental Nutrition Assistance Program or free groceries and/or meals from charitable organizations since the start of the pandemic. Five percent of homeowners and renters reported receiving deductions or deferrals of their payments.

These different types of assistance helped boost the financial security of families. Seventy-seven percent of adults reported they were financially secure in June, up from 72% in April and 75% in October, before the pandemic hit.

In his testimony before the House Financial Services Committee on Tuesday, Fed Chairman Jerome Powell noted that “employment and overall economic activity … remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain and the downturn has fallen unequally.”

Powell added that “the rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics.”

He noted, as he has many times before, that “the path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” suggesting again that more financial relief is needed from Congress while the Fed remains committed to using its own tools “to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”