Economic Notes: Not Feeling Good; Just Feeling Better
9/21/2009
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Americans’ net worth increased by 3.9% in the second quarter of 2009, after having declined for six consecutive quarters. Gains in the value of primary assets (i.e., financial investments and real estate) and reductions in consumer credit and mortgages increased households’ net worth by almost $2 trillion above where it stood at the end of March.
Despite the quarterly rise, Americans are still significantly less well-off than they were prior to the turmoil of the past two years. Since the end of 2007, household net worth has dropped by $10.8 trillion – a loss of 16.9%. The loss was concentrated in financial holdings (-$8.4 trillion) and real estate (-$2.8 trillion).
At the pace of the second quarter’s gains, U.S. households could return to their pre-recession net worth toward the end of 2010. Will Messrs. Dow and Jones cooperate?
Households loosened their wallets a tad in August, leading to a 3% rise in retail sales, reaching the highest monthly total since October 2008. Driving the gain was an 11.9% increase in auto sales as “cash-for-clunkers” drew toward an end. Other than autos, the only other significant gain in retail sales was at gasoline stations (+5.1%).
Homebuilding
continued its slow recovery, as housing starts rose by 1.5% in August. The month-on-month rise was due to a jump (+35%) in multifamily construction in the Northeast. Had it not been for that regional blip, activity would have declined for the month.
Nevertheless, since homebuilding bottomed in April, starts have risen by 24.8%. And the upward trend in building permits suggests that residential construction should continue to increase – slowly.
As the third quarter nears its end, the economy is not feeling good, but it is feeling better.
***
The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.