I wonder if the national debt is factored in here anywhere, since we have blown trillions of dollars in stimulus to balloon the market back up

http://news.yahoo.com/s/ap/20100311/ap_on_bi_go_ec_fi/us_net_worth

WASHINGTON – Americans regained more of their shrunken wealth last quarter, mainly because the healing economy boosted stock portfolios. But the gain was less than in the previous two quarters.

The Federal Reserve reported Thursday that household net worth rose 1.3 percent in the fourth quarter to $54.2 trillion. It marked the third straight quarter of gains. Net worth had risen by a stronger 4.5 percent in the second quarter of 2009 and by an even faster 5.5 percent in the third quarter.

Net worth is the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards.

Even with the gain, Americans' net worth would have to rise an additional 21 percent just to get back to its pre-recession peak of $65.9 trillion. That shows the vast loss of wealth people have suffered from the worst downturn since the 1930s.

Growth in stock portfolios delivered the biggest lift to net worth in the October-to-December period. The value of stocks rose by nearly 4 percent to $7.7 trillion. Higher home prices helped a bit. The value of real-estate holdings edged up 0.2 percent.

During the recession, which began in December 2007, household net worth plunged as low as $48.5 trillion in the first quarter of 2009. Stock holdings and home values nose-dived. As their net worth evaporated, Americans felt less inclined to spend.

For all of last year, consumer spending dropped 0.6 percent. This year, as wealth, the economy and financial conditions slowly recover, consumer spending is projected to grow around 2.2 percent, according to the National Association for Business Economics.

By contrast, in 1983, when the economy was recovering from the 1981-82 recession, consumer spending surged 5.7 percent. Unlike past rebounds led by ordinary shoppers, this one so far has been driven more by spending from businesses, foreigners and — until it runs out — government stimulus. Consumers have been spending more lately. But they remain cautious.

Consumers would need to see a prolonged pickup in their net worth to persuade them to ratchet up their spending, said Scott Hoyt, senior director of consumer economics at Moody's Economy.com.

"It would take a string of increases of a size that they believe can continue and that they can have faith it for consumers to really boost their spending," Hoyt said.

Each dollar increase in household wealth translates into roughly three to four cents of consumer spending over two years, Hoyt said.

That isn't much.

Just ask Marcia Karon, 55, of Atlanta. She's felt little benefit from the economic rebound or the stock market. Her family's finances are being crimped in other ways. Her husband has taken two pay cuts in the past year, their property taxes remain high and "everything else is going up," she says.

"Things are tight," says Karon, who works at home as a calligrapher and bookkeeper. "Over the last year we've had to go through what little savings we had set aside just to get by."

Not until 2012 does Hoyt think household wealth will return to its pre-recession levels. A severe setback to the economy could delay it further, he added.

Concern about their diminished net worth led many Americans to reduce their borrowing last year. Household debt — including mortgages, credit cards, auto and student loans — contracted at an annual rate of 1.75 percent in 2009, the Fed report said. It was the first annual decline on record.

Benefiting most in the fourth quarter were those invested in the stock market. The Standard & Poor's 500, a broad barometer of stocks, climbed 5 percent in the quarter. The Dow Jones industrial average gained 7 percent.

But the gains have slowed so far this year. The two indexes have risen just 2 percent and 1 percent, respectively. Even with the market's rally, the S&P 500 is still 27 percent off its October 2007 peak.

Holders of 401(k) retirement accounts have recovered somewhat from the walloping they took in the meltdown. But even with continued contributions to those accounts, many are still struggling. According to the Employee Benefit Research Institute, average account balances for 401(k) contributors ages 45 and older remained 2 to 3 percent lower at the end of December than at the end of 2007.

For all of 2009, net worth grew by $2.8 trillion, the largest annual gain since 2006 — before the recession hit.