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What Recession? U.S. Household Worth Rose $1.7 Trillion in ’12

While naysayers would still claim we are in the throes of a lasting recession, one that’s been offset again by the recent federal budget cuts, and while some might argue that we are not out of the thick just yet, the facts paint a rather different, prettier picture. For example, the Dow Jones closed at a record high a few days prior, breaking its previous peak from back in 2007, and telling of more confident investors. The housing market is healthy again, with analysts purporting that it’s now back to being a seller’s market. Tantamount to that is that the estimated U.S. household net worth rose by a whopping $1.7 trillion for the fiscal year 2012. This only leaves one unanswered question: What recession?

According to the U.S. Federal Reserve, this is the highest that the net worth has risen since 2007. How odd that this correlates directly with record stock market gains, a seller’s housing market and the recent budget cuts, which seemingly have many people overly concerned; all things considered.

According to a report by Bloomberg:

“Household wealth is approaching its pre-recession level as the recovery in home values helps Americans overcome higher taxes Congress put in place this year. Federal Reserve policy makers’ plans to keep lending rates low may continue to shore up finances, giving consumers the confidence to keep buying big- ticket items including cars and homes.”

“Growing wealth puts households in a better position,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, in a recent interview with Bloomberg. “They’ve acquired a lot of financial assets, and that’s a positive for spending,” he added.

It is important to keep in mind that our economy has not fully recovered just yet. U.S. household net worth is still about $1.34 trillion behind what it was pre-recession, back in 2007. Yet at the same time, a healthy gain of nearly $2 trillion in one year says a lot about the rapid pace of recovery.

While analysts are being cautiously optimistic, the numbers tell the real tale. Substantial gains have been made across the boards, in spite of budget cuts. From the way it looks, these trends look like they are on course to continue throughout 2013. If that happens, it wouldn’t be that unrealistic to think that we may be back to a better economy than we had pre-recession by the end of this year.

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