U.S. Household Net Worth Makes a New High

Yesterday, the Federal Reserve released its Z.1 Financial Accounts of the United States, reporting on fourth quarter 2015 data. Also known as the flow of funds report, it looks at various national balance sheets, among other interesting data points.

The report included data on U.S. household and nonprofit organizations net worth, which reached a new record with total net worth of $87.8 trillion. This topped the previous record of $86.4 trillion from the second quarter of last year. A stable stock market and improving housing prices were cited as main reasons for the increase. According to LPL Research’s Chief Economic Strategist John Canally, “Fed flow of funds is often overlooked as ‘old news,’ but the fact that household net worth is $32 trillion above the 2009 low and $20 trillion about the pre-2007 high is a big deal.”

Do You Feel Wealthier?  New High in Household Net Worth

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Source:  LPL Research, Federal Reserve Bank Z.1 Financial Accounts of the United States 03/10/16

 

There are different ways to look at this data, however. If you look at the net worth as a percent of disposable personal income, this ratio is up near the highest it has been since before the Great Recession. As you can see below, this ratio sees a large drop around recessions. That isn’t happening yet, but is worth tracking closely.

Ratio of Net Worth as a Percent of Disposable Personal Income Is Near Highest Since the Great Recession
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Source:  LPL Research, Federal Reserve Bank Z.1 Financial Accounts of the United States 03/10/16

 

And lastly, adjusting household net worth by the U.S. population didn’t quite make a new high; it is still fractionally below the second quarter of last year.

Household Net Worth as a Percent of U.S. Population Still Slightly Lags Q2 2015
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Source:  LPL Research, Federal Reserve Bank Z.1 Financial Accounts of the United States 03/10/16

 
In summary, it is always a good sign to see overall wealth increasing. Should the economy avoid a recession (current recession odds are 30%, in our opinion), a stable housing market and modest equity growth may continue to push this metric higher throughout 2016.

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