The cruelest twists of the economic recovery

The stock market’s hitting record highs lately and housing values are rebounding. Yet, nearly six years since the Great Recession began, many Americans haven’t recovered what they lost. Why?

A couple of reasons are obvious. It was a really bad recession, worse than the early 1980s. Job numbers have not bounced back the way they have in prior recessions and unemployment remains stubbornly high.

Less discussed is the fact that many Americans are not players in the two parts of the economy where wealth is growing — stocks and higher-value homes.

A recent Federal Reserve Bank of St. Louis report puts data to this reality:

When adjusted for inflation and growth in the number of households … average real net worth has recovered only 76 percent of the loss incurred between 2007 and 2009. The slow recovery of wealth is due primarily to housing, which only began to rise in value at the beginning of 2012.

The faster recovery of financial assets mainly has benefited wealthier families, who own most of the economy’s stocks and other financial assets … the nascent housing recovery appears to reflect rising prices of relatively more expensive houses. This also likely benefits wealthy families more than those who own lower-value houses or are renters.

The report  concludes that “lower-value homes, such as the $100,000 and $200,000 houses in our example, generally fell to a deeper trough in 2011 and subsequently have recovered more slowly than their higher-value counterparts.”

So to recap: Stocks and high value housing have led wealth recovery, which is why many Americans don’t feel recovered.

Here’s the cruelest economic twist of the past six years: Americans’ stock ownership fell as stock values recovered and then soared.

Here’s a Gallup poll.


Here’s the S&P 500 measure of U.S. stock market growth since June 2009, the official start of the recovery following the Great Recession.


If only those two graphs were pointed in the same direction.

Staying invested in the market wouldn’t have solved all the problems tied to the recovery. But it would have helped.