Everyone Has The Falling Household Net Worth Story Dead Wrong

net worthFrom the Survey Of Consumer Finances

Photo: Federal Reserve

Earlier this week, the Federal Reserve released its Survey of Consumer Finances (SCF), which indicated that household net worth plummeted from 2007 to 2010. Specifically, the median value of real (inflation-adjusted) family income before taxes fell nearly 40 per cent to  $77,300, while the mean fell more than 14.7 per cent.However, this data seems to conflict with the Federal Reserve’s Z.1 flow of funds data.

According to the Z.1, aggregate household net worth fell 10.5 per cent from 2007 to 2010,  which is much more modest than the 14.7 per cent average drop indicated in the SCF.

household net worthFrom the Z1. Check out Line 42

Photo: Federal Reserve

Unfortunately, the Z.1 does not break out median data, so we were unable to confirm the SCF’s 40 per cent drop.So, which report is right?

A source at the Federal Reserve told Business Insider that both surveys were conducted by separate groups, but that the Z.1 data was much more robust and comprehensive.  The source also reminded us that the SCF is old news and that net worth was on its way back up.

Indeed, through Q1 2012, the total household net worth climbed quarter-over-quarter to $62.9 trillion. That’s still something of a drop—about 5 per cent compared with $66.2 trillion in 2007. 

Again, the drop is much more modest than what everyone had been making noise about.

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