Fed reports US households wealth looking up amid positive economic outlook

With the housing sector picking up amid a soaring stock market, American households continue to recoup losses from the financial crisis and the severe recession that followed.

Without factoring in inflation, the net worth of American households now stands higher than before the recession struck five and a half years ago, the Federal Reserve said yesterday.

Household net worth soared just over $3 trillion, or 4.5 per cent, to $70.3 trillion in the first quarter of 2013, overtaking the $68.1 trillion reached in 2007.

Following adjustment for inflation, total net worth still stood below the peak reached in mid-2007, according to Dean Maki, chief US economist at Barclays.

The encouraging report from the Fed comes alongside other signs that Americans were feeling slightly better about the economy.

In a New York Times / CBS News poll conducted beyween 31 May  an d 4 June , 39 per cent of respondents said that the recent condition of the economy was very or fairly good, the highest share saying this not only since president Obama took office but also since the recession officially started in December 2007.

According to a third of respondents, the economy was getting better, similar to what the trend had been in the previous six months. (According to another 24 per cent it was getting worse while 42 per cent said the economy was staying about the same.)

Around half of respondents - 46 per cent - rated the job market in their areas as very good or fairly good, and a third said they thought their local job markets would improve over the next year.

The poll had a margin of sampling error of plus  minus three percentage points.

Meanwhile, Peter Coy writes in Bloomberg that net worth could grow either because assets increased or because liabilities declined. He says in this case, it was a little of each, with household debt falling due consumers spendin cautiously, which was holding back economic growth while helping household balance sheets.

Some growth in household debt might actually be a ''positive sign for the economy'' if it was not too extreme, Coy quotes IHS Global Insight as saying in a commentary on the Fed report.

Another good sign was that Americans owned a bigger stake in the houses they had purchased. Owners' equity as a percentage of the value of household real estate stood at 49.2 per cent in the first quarter, up from just 39.5 per cent in 2009.

While households improved their financial position the federal government slipped deeper into debt. The Treasury issued a net $1.2 trillion in debt, with the Federal Reserve and foreign investors the main buyers. Also IHS Global Insight noted, households, banks, corporations, and broker-dealers sold Treasuries on a net basis.