Americans Are $2 Trillion Richer?

News is out today that the net worth of Americans increased by around $2 trillion in the second quarter. Assuming 300 million Americans, that ends up being about $6,667 per capita. Funny, I don't recall my wealth increasing by that much. But maybe that's just because I haven't checked my 401k lately. So what does this statistic really mean in the broader context?

Well, it certainly can't be construed as bad news. An increase in national wealth is always better than the alternative. Here's where that increase comes from, via CNN Money:

After suffering horrific declines in the wake of the global financial crisis, the stock market began recovering this spring. The S&P 500 gained 15.2% in the April through June period for its best quarter since the final three months of 1998. The Dow gained 11% and the Nasdaq rose 20% -- posting their best three-month periods since the second quarter of 2003.

Real estate also rose in value for the first time since the end of 2006. Household real estate assets went up 2% to $18.3 trillion, after plummeting since the end of 2006.

Although I have no statistics to back it up, based on this I'd bet that the increase in wealth is almost certainly skewed towards richer Americans. After all if you don't own a home or stocks, then you are probably haven't participated in this newfound wealth. Indeed, if you're one of the 9.7% without a job, then you're even worse off.

So what does this number mean versus what's been lost? CNN Money explains:

Still, Americans have a long way to go before they recover the wealth they once had. U.S. net worth peaked at $65.3 trillion in the third quarter of 2007.

That current level is $53.1 trillion. So wealth would still have to increase an additional $12.2 trillion or 23% to get us back to the peak. So while the second quarter increase is good news, it hardly signals a return to good times.

But there is one piece of very positive information CNN Money also provides:

At the same time, consumers continue to pay off their bills. Household debt shrunk by an annual rate of 1.7% in the second quarter, the fourth consecutive decline. Debt loads had never contracted until the current downturn.

Businesses are also pulling back on the debt they carry. Debt contracted at an annual rate of 1.8%, the second decline in a row.

Less private debt is a great thing. Just don't ask about public debt:

Governments, however, are loading up on debt as they try to prop up the economy. Federal government debt ballooned 28.2%, the fourth straight increase, while state and local governments increased their debt levels by 8.3%.