Here’s a picture of household net worth, in both nominal and real terms, with my nowcasts for Q3.
Figure 1: Household net worth (blue), nowcast for 2024Q3 (blue square), in billions $; real household net worth (tan), nowcast for 2024Q3 (brown triangle), in millions 2022$, on log scale. NBER defined peak-to-trough recession dates shaded gray. Real net worth deflated using Chained CPI, September value uses Cleveland Fed nowcast as of 10/6/2024. Source: Federal Reserve Flow of Funds via FRED, BLS, Cleveland Fed, NBER, and author’s calculations.
Nominal (real) net worth is nowcasted to rise 2.5%(2.3%) q/q in Q3.
I generated the nowcast for household net worth by a log-log regression, 2021Q3-2024Q2:
worth = 14.184 + 0.382sp500 + 0.243home
Adj-R2 = 0.91, SER = 0.013, DW = 2.22, NObs = 12. Bold face denotes significance at 10% msl, HAC robust standard errors.
Will this support consumption? Pre-2019 data says yes (in log first differences); not so clear in post-pandemic data.
Addendum:
The composition of the net worth is of interest.
Source: Federal Reserve Board.
While the bulk of the gain has been in the high income deciles, the high income deciles also account for a disproportionate share of consumption.
Postscript:
Reader Steven Kopits argues a correction is a comin’. I assume he means in equities (real estate seems primed to rise further). It’s useful to keep in mind that for the majority of us (I’ll count myself in the not-top 10%).
Even if equities decline, for most Americans, real estate is a much bigger component than equities.
Shouldn’t that be millions? Fed says so.
Neil Hornbeck: Yup, thanks! Fixed now.
THIs is why i love this blog so much. IF you dared corrected Johnny “Grumpy economist” CUckrant. he’d tell you your factual math was “politically motivated”.
EVen profs have blunders. Just “come clean” when you do.
Economic facts undermine Republican election-year talking points
https://www.msn.com/en-us/money/other/economic-facts-undermine-republican-election-year-talking-points/ar-AA1rPIW1?ocid=BingNewsSerp
You have heard all the Trumpian lies. You know the facts. But I have not read a Steve Benen piece in a while and this discussion is spot on.
There used to be a serious penalty for gross distortions and outright lies – and all the major media would point out such scandals. Remember Dan Rather, one little mistake 6 weeks before the election and he was out. Voters were outraged too, and voted for Bush.
That penalty has disappeared. Fox news is promoting factual lies and sometimes even making some up themselves. Fact-checking is not swinging many votes.
The voters are generally not educated or interested enough to sort out lies from truth – and many have been numbed to outrageous lies by the overwhelming flow of them. When it’s a daily thing it’s no longer shocking. False equivalence and bothsiderism is abundant – and remarkably effective on the intellectually lazy.
The ignorant and disinterested masses have reverted to the lazy world of “us or them” tribalism. If it comes from “one of us” it’s true, if it comes from “one of them” it’s false – no need to waste time on thinking.
Yes, it will be a tailwind, for now. But a correction is somewhere out there.
A correction? Why little Stevie boy? Is this your stupid suppression theory? Or some misunderstanding of the Real Business Cycle model?
We would ask you to learn to write but then when you do write out something – it is pure gibberish.
Kopits means the count correction, after the white Republican’s voter suppression of Black Democrats. I agree.
well, it is pretty well understood that at some point in the future there will be another correction. and another recession. that is not in dispute. steven, eventually it is going to happen. what makes somebody valuable is to accurately predict when it will happen. at some point, a comet will strike earth. that prediction is true, but of little value if i cannot accurately tell you when.
Yes, economic and financial cycles do lead to cycles in aggregate wealth. Not news.
Do you have some further point to make?
Stevie has forecasted $200 a barrel oil. Hasn’t happened year. Stevie told us we were in a recession in 2022. Didn’t happen even two years later. Stevie’s forecast record? As bad as Antoni’s!
I guess baffling and Stevie pooh forgot how to use FRED:
Households; Net Worth, Level
https://fred.stlouisfed.org/graph/?g=FBGH
Hey – even nominal wealth fell during the pandemic as well as during the Great Recession. I guess one should also inflation adjust these figures.
But to claim that during some future period we might just see wealth take a dip is not exactly a big contribution to this discussion. DUH!
The first graph shows that real wealth is expected to rise even more in 2024QIII. Yet our resident Ph.D. in worthlessness (Steven Koptis) says there must be a “correction”. He has no idea WTF he means by correction and cannot be bothered to “educate” us where this alleged “correction” is coming from.
Just another day in the babbling brain of Steven Koptis! Ahem!
“They’re all going to be on the same side, and they’re all going to understand the policies, and we’re going to give people the role based on their capacity — and their fidelity and loyalty to the policy, as well as to the man.”
statement made by trump transition team leader. trump demands a loyalty test to him, not the constitution. and so it begins. musk is correct, this may be the last election. trump is deranged and unhinged, and will usher in a very undemocratic era in the history of the united states of america. he is looking for retribution. and he will most certainly jail, torture and probably execute those who he believes are not loyal to his agenda. for those who wondered how a man like hitler came to power, you are seeing it up close and personal.
The Figures raise questions about real vs nominal wealth and about timing.
Real wealth has risen, mostly, since Q4 2022, but in Q2 of this year was still down from its 2021 peak. Nominal wealth is piling up new record highs recently. Do consumers respond quickly to new highs in nominal wealth? Slowly to partial recovery in real wealth? Something in between?
For middle-class households, access to housing equity is an important factor in the wealth effect. We’ve discussed here in comments the increased use of HELOC cash rather than refinancing during the high-rate period. We also know that refinancing has picked up, but mortgage equity withdrawal in Q1 and Q2 was modest. So mostly just the reduction in monthly payments due to refinancing, also modest so far, contributes to consumers’ available spending money. What other indicators of spending head/tailwind do we have? Here are credit card borrowing and the person saving rate:
https://fred.stlouisfed.org/graph/?g=1veXm
New credit card borrowing has slowed, and the saving rate has risen. These are backward-looking, so don’t answer the question about future tailwinds, but suggest that households have grown cautious about spending. Or that real income growth has allowed households to borrow less without cutting back on spending.
Ron DeSantis facing Hurricane Milton chooses Trump over the citizens of Florida:
Gov. Ron DeSantis refuses call from Kamala Harris ahead of Hurricane Milton: Source
https://www.msn.com/en-us/news/us/gov-ron-desantis-refuses-call-from-kamala-harris-ahead-of-hurricane-milton-source/ar-AA1rQzt7?ocid=msedgdhp&pc=U531&cvid=75a3dc38401641088f4c60e77b5eba73&ei=7
Florida Gov. Ron DeSantis has refused to take a call with Vice President Kamala Harris about Hurricane Milton, a source close to the governor told ABC News. The DeSantis team believes the call from the vice president is politically motivated, according to the source, and is thus refusing to take the call. DeSantis staffers also said the governor has not spoken to President Joe Biden in at least the last few days in the wake of Hurricane Helene and as the massive Hurricane Milton takes aim at Florida.
Biden has tried to cover the Governor. I guess Trump told the Governor not to take the call.
No talking with them before – but the minute this hit DeSantis will be complaining they have not fixed it all.
Unfortunately FEMA is currently understaffed and over stretched. Which would make planning ahead and coordinating even more important. But this is not about Floridians its about getting Trump elected.
this is certainly an example of desantis getting some of his citizens killed. he is doing exactly what he claims harris is doing. desantis is playing political games here, but people’s lives are at stake. he has no concern about that.
those of you in the florida crosshairs. when you return to your decimated properties on thursday, remember the reason you have no help on the ground is that your governor desantis thought it was better politically for you to suffer than for you to receive federal support. give ron a call if you need help with the cleanup, or a place to sleep. he must have a plan in place, to disregard federal help from biden and harris.
FEMA is recruiting heavily right now. Don’t know what number of openings there are to fill, but the ads are showing up a lot.
Are you better off now than 4 (5) years ago? You betcha!
Samuel H. Williamson, Emeritus of Miami U., keeps track on some historical data, including economic growth by presidential administration:
https://www.measuringworth.com/Presidents.php
Have a look at the table for real GDP per capita. You’ll find the well-known result that Democratic administrations generally outperform Republican administrations – 6 of the top 7 are Democrats. Also notable, when the question is whether we’re better off under Biden than Trump, is that at mid-year 2024, Biden comes in 7th among the 23 presidents since 1900. Ahead of Reagan. Well ahead of Trump, even excluding Trump’s Covid year. Ahead of every Republican administration except Harding/Coolidge. Like it or not, the average person is better off under Biden than Trump, and has improved their situation more under Biden than under Trump.
Williamson’s website can generate some pretty cool comparisons. No graphs, though. Gotta poke his data into your spreadsheet for that.
I think the true narrative that the economy is better has some political downsides. There are a lot of people who have been (or feel) left behind in this growing economy. When they are told that the economy is great they feel lied to. What democrats need to emphasize is that their policies will make sure that this wealth gets distributed better and in a more fair way. We should not use this wealth to cut taxes for the rich, but to improve health care and roads and increase wages and save social security, etc. Democrats are the only ones who will make sure the wealth is not just making rich people richer.