According to a USA Today report, Americans' net worth plunged a record 17.9% in 2008 as the value of their homes, stocks and other assets dropped swiftly. The Federal Reserve said Thursday in a report that did not bode well for consumer spending and the overall economy this year.
With net worth dropping so much, consumers are likely to focus on saving, as they realize they can't rely on their homes and stock portfolios as ever-rising sources of income, says RDQ Economics senior economist Conrad DeQuadros.
Such saving, while good in the long run, will likely prolong the economic slump. Consumer spending drives more than two-thirds of U.S. economic activity.
U.S. net worth, a measure of households' assets minus their liabilities, such as debt, was $51.5 trillion in 2008, the lowest since 2003.
Other details from the report:
•The value of household real estate fell for a second-consecutive year in 2008, declining 10.5%, the biggest drop on record.
•Stock market wealth plunged a record 39.9% in 2008 to $5.5 trillion.
•Corporate profits fell 10.8% in the September-December quarter and were down 8.8% for the year as a whole.
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