The Federal Reserve on Thursday at noon released data that provided stark evidence of the toll the housing downturn, stock crash and sagging job market have taken on the U.S. household: its net worth plunged 17.86% in 2008.
Total net worth of all U.S. households, defined as the difference between the value of assets and liabilities, was $51.5 trillion at the end of the fourth quarter, down $5.1 trillion from the third quarter and $11.2 trillion from the fourth quarter of 2007, the Fed reported in its quarterly Flow of Funds Accounts of the United States.
As worth declined, so too did household debt. It fell at an annual rate of 2% during the quarter, following two quarters of weak growth. The net result was a 0.005% increase for the full year, a decrease of 6.25 percentage points in 2007. In the quarter, home mortgage debt increased at an annual rate of 1.5%, while consumer credit fell 3.25%.
Government debt surged at an annual rate of 37% during the quarter, roughly equal to the rate of increase in the third quarter. For the year, government debt rose more than 24% compared to a 5% increase in 2007.
Debt of businesses other than financial companies rose at an annual rate of 1.75% during the quarter, 2.5 percentage points less than the third quarter, driven by slowdowns in commercial paper, loans and commercial mortgage borrowing.