WASHINGTON — Americans’ wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.
At the same time, corporations increased their cash stockpiles to record levels.
Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.
Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.
The value of Americans’ stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.
Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.
Corporations held a record $2.1 trillion in cash at the end of September.
Stock market declines have held back Americans’ long, slow quest to recover losses from the 2008 financial meltdown.
Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans’ wealth. That’s less than housing but ahead of bank deposits, according to the Fed’s report.
Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.
The average balance in 401(k) plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.
Thanks largely to workers’ added contributions and company matches, about 92 percent of people who have 401(k) retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute.
A rise in housing prices would help increase net worth by increasing home equity. But that still hasn’t happened.
Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.