According to a report in The Washington Post, American households have rebuilt less than half of the wealth lost during the recession. A new analysis from the Federal Reserve says that recovery lacks the spending power to fuel a robust economic recovery.
The Post reported that households lost $16 trillion in wealth in 2008 and 2009 from sinking stock prices and the collapse of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed.
In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker.
“A conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the report stated.
The Fed is spending $85 billion a month to lower long-term interest rates and stimulate the economy. It has also kept short-term interest rates to near zero, helping push the stock market to record highs and increasing home prices. Consumer confidence is at its highest point since February 2008. Officials hope those factors will eventually result in more consumer spending power.
But William Emmons, chief economist for the St. Louis Fed’s Center for Household Financial Stability, said many families have not experienced any recovery – or are even still losing wealth. Young Americans, those with few skills or unemployed, may not have been able to rebuild any wealth. He noted that though the number of foreclosures has dropped significantly, it is still more than double the pre-crisis amount.