NCPA - National Center for Policy Analysis

Recession Pummeled Household Net Worth

June 28, 2002

By most economic indicators, last year's recession was mild. But a look at household net worth gives a completely different picture.

  • Figures released by the Federal Reserve on June 7, show that total household net worth, adjusted for inflation, fell by 12.3 percent from its peak in the first quarter of 2000 to the low point at the third quarter of 2001.
  • That represents a total loss of more than $4 trillion -- or roughly 40 percent of gross domestic product.
  • The only postwar downturn that hit wealth as hard was the recession of 1973-75.
  • Apparently rising debt and a declining stock market were only partially offset by higher house prices.

Since the third quarter of 2001, household net worth has inched back up. But there is the prospect this may not continue. The stock market has again fallen sharply, real wages seem to have stopped climbing and housing prices across much of the country seem to be leveling out.

Source: Michael J. Mandel, "Economic Trends: This Recession Wasn't So Mild," Business Week, July 1, 2002.

 

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