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U.S. household net worth hits new record level: Fed

Yahoo Finance’s Akiko Fujita and Denitsa Tsekova discuss U.S. household net worth reaching a new record level, according to the Federal Reserve.

Video Transcript

AKIKO FUJITA: Well, we've seen the net worth of American households seeing a big bounce back in the second quarter after a record drop earlier this year. When you look at the number there, we're talking about the highest level in the second quarter. Let's bring in Denitsa Tsekova, who's been tracking the numbers for us.

And Denitsa, I think a lot of people were surprised to see this, just given what we saw in the first quarter. What has propelled this number to reach these levels?

DENITSA TSEKOVA: Yeah, as you said the net worth of US households increased by $7.6 trillion. That's around 7% in the second quarter. And this is the sharpest increase we've had on record, or at least since 1952. This jump was driven mostly by gains in corporate equity. So we have $4.7 trillion increase there.

We also have a significant increase in real estate of around $458 billion. This brings the total net worth of American households to around $119 trillion in the second quarter. And this is still, again, the highest number we have on record.

AKIKO FUJITA: And Denitsa, when we're talking about the gains in the stock market though, certainly a lot of debate about just who actually is seeing those gains right now. When you look at the number itself in the second quarter, how are we seeing this distributed across different income sectors or income brackets?

DENITSA TSEKOVA: Yeah, that's-- this is a great question. So there will be more data coming on how it's broken by income brackets. But what we see so far is that the gains are concentrated in stocks and home prices, which are two things that we know that benefit high income earners and sometimes middle-- middle income earners.

So around 45% of Americans don't own stocks. So for them, they didn't really reap the benefits of the gains in the stock market. And the increasing house prices, maybe they benefited more, you know, also middle income but mostly high income earners. And what we're seeing for low income families is that they didn't benefit much in neither of those groups.

And what really supports them during the pandemic is stimulus payments, unemployment benefits. And most of those things have really expired. So what I'm hearing from different experts is, first, that they mostly didn't gain much in terms of net worth during the second quarter. And what we're seeing is that with the stimulus negotiations being very uncertain, they may be hit even harder in the third quarter.

AKIKO FUJITA: Yeah, that seems to point to an even bigger divide, which is something we've been talking about so much. I mean, what is the outlook for the third quarter if we're talking specifically about household income right now? A lot of the factors that could affect the volatility-- at least if we're talking just about equity gains, and how that's contributed to household income?

DENITSA TSEKOVA: For sure, for sure. And we're seeing even more uncertainty, especially with the extension of the unemployment benefits. And we're seeing this becomes less and less uncertain. We saw personal income was supported during the second quarter by the stimulus checks and the unemployment benefits. But we'll see how this will go during the-- during the third quarter.

AKIKO FUJITA: OK. Denitsa Tsekova, thanks so much for bringing us those numbers.