The recession may not yet be as bad as the long, deep ones of the 70s and 80s, but even those who haven’t lost their jobs or homes are feeling all the poorer for it.
“I think wealth loss is the defining quality of this recession,” says veteran economist Ram Bhagavatula, who’s managing director at the hedge fund Combinatorics Capital.
That’s evident in the stunning decline in household wealth, which according to Federal Reserve data, fell from a peak of $64 trillion in the third quarter of 2007 to $56 trillion in the third quarter of 2008.
“And the real damage was done in fourth quarter of 2008,” adds Bhagavatula.
The stock market fell off a cliff in the last few months of the year, with the S&P 500 losing half of its value.
But the decline in stocks is older and greater than that. The S&P 500 is down 50 percent since the official start of the recession in January 2008. And that's clearly hit home.
“The problem now is that there are more retirees with money in the stock market,” notes Christopher Rupley, chief financial economist at Bank of Tokyo-Mitsubishi.
Meanwhile, the housing market has been a wealth eraser for millions more, many of whom now have negative equity or are facing foreclosure.
The median price of a single-family home went from $219,000 in 2007 to $180,000 in the fourth quarter of 2008, a 13.7 percent decline.