WASHINGTON (Reuters) - U.S. household wealth fell by $1.5 trillion in the second quarter, according to Federal Reserve data on Friday that showed the strain a slow-paced recovery and high unemployment are putting on Americans.
Household net worth fell to $53.5 trillion, well below the $64.2 trillion it had reached at the end of 2007 when the recession officially began, according to the central bank’s quarterly flow of funds report.
Declines in the value of financial assets -- especially in stocks and mutual funds -- accounted for much of the decline in second-quarter net worth. Stocks alone were down $1.9 trillion to $14.9 trillion, more than offsetting small gains in other areas like state and local government retirement funds.
Consumers pared debt at a seasonally adjusted annual rate of 2.3 percent, the ninth consecutive quarter in which they did so. Home mortgage debt fell at an annual rate of 2-1/4 percent after a 4-1/4 percent drop in the first three months this year.
During the financial crisis that wracked the country from 2007 to 2009, trillions of dollars in housing and financial market wealth was wiped out and heavy household and financial sector indebtedness was exposed.
The government has stepped in with increased spending and stimulus programs to try to spur recovery but the unemployment rate in August edged up to 9.6 percent and housing markets are still in distress.
Federal government debt expanded during the second quarter at a hefty 24.4 percent annual rate after a 20.5 percent increase in the first quarter. By contrast, state and local government debt shrank 1.3 percent during the second quarter.
Business debt excluding financial companies was up a slim 0.1 percent following a 0.5 percent rise in the first quarter.
Data issued on Thursday by the U.S. Census Bureau similarly underlined the extent to which the financial crisis and ensuing recession has hurt household incomes.
The Census Bureau’s annual look at U.S. living standards -- once the envy of the world because of the upward mobility Americans could tap into -- found the poverty rate at a 15-year high of 14.3 percent in 2009, up from 13.2 percent in 2008.
Reporting by Glenn Somerville; Editing by Andrea Ricci