Stock mar­ket surge lifts U.S. house­hold wealth

Austin American-Statesman - - BUSINESS -

The stock mar­ket’s rise to record lev­els fu­eled a big in­crease in U.S. house­hold wealth in the fi­nal three months of last year. The wealth gains could lead to more spend­ing that would lift the econ­omy, but the in­creases aren’t widely shared.

Amer­i­cans’ stock and mu­tual fund port­fo­lios jumped $728 bil­lion in value in the October-De­cem­ber quar­ter, the Fed­eral Re­serve said Thurs­day. Home val­ues rose $557 bil­lion.

To­tal house­hold wealth in­creased 2.3 per­cent to $92.8 tril­lion. The fig­ure in­cludes check­ing and sav­ings ac­counts, and sub­tracts mort­gages and other debt,

Still, not all Amer­i­cans are reap­ing the gains. The wealth­i­est 10 per­cent of Amer­i­cans own 80 per­cent of the stock mar­ket. And younger Amer­i­cans are less likely to be home­own­ers than pre­vi­ous gen­er­a­tions, as rent­ing in­creased in the wake of the hous­ing bub­ble. They have missed out on the re­bound in home prices that be­gan in 2012.

Typ­i­cally, an in­crease in house­hold wealth can boost over­all spend­ing and help ac­cel­er­ate growth. By some es­ti­mates, Amer­i­cans spend three to five cents for ev­ery dol­lar of ad­di­tional wealth, what econ­o­mists call the “wealth ef­fect.”

Yet, with wealth gains more con­cen­trated among richer and older house­holds, who are less likely to spend more, that ef­fect may be lim­ited.

The wealth­i­est 1 per­cent held 42 per­cent of the na­tion’s wealth in 2012, the lat­est data avail­able, ac­cord­ing to re­search pub­lished ear­lier this year by econ­o­mists Em­manuel Saez and Gabriel Zuc­man of the Univer­sity of Cal­i­for­nia-Berke­ley.

And ac­cord­ing to a pa­per re­leased ear­lier in De­cem­ber by Saez, Zuc­man and Thomas Piketty, the rich­est 1 per­cent of Amer­i­cans de­rive more than half their in­come from cap­i­tal as­sets such as homes, stocks and bonds, as well as their share of pen­sion sav­ings.

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