All the News is Bad

The economic news has been pretty bad so far this month. The jobs report that came out a couple of weeks ago showed only anemic job growth. Enough people came back into the workforce that even though jobs were added, the overall unemployment rate remained at 8.2%. On slate.com, blogger Matt Ygliasias called it “The Jobs Report of Doom.”


There is a steady drumbeat of bad news coming out of Europe these days. Greece’s exit from the Euro zone appears to be almost a foregone conclusion. Now Spain’s banks need a bailout, and even the Spanish government is having trouble borrowing money.

Finally, this week the Federal Reserve came out with a report that showed median household wealth dropped like a stone in the recession. In 2007, the median level of household wealth was $126,400. Half the households had more wealth, half had less. In 2010, that figure had dropped 39%, to $77,300. This is about where that number was in 1992.

This is one report where I would like to dig into the data a little more. Most of the loss in wealth came about from the collapse of the housing bubble. I have to wonder if there has been growth in households with negative net worth. If you have an underwater mortgage and little in the way of other savings, you will have a negative net worth. Your debts exceed the value of your assets.

Similarly, the explosion in student loans over the last few years has created a number of negative net worth households. If you graduate from college with $30,000 in student loans, even if you get a job, you are starting out with negative net worth.

If the number of households with negative net worth have increased significantly, that could explain why the drop off in median net worth has been so sharp.