May 16, 2021

At a Fed Conference, Views Differ Sharply on Stimulus’s Effect

Unconventional monetary policy “has been a significant success altogether,” Christine Lagarde, managing director of the International Monetary Fund, said in a lunchtime address. She said the efforts continued to yield benefits and should not be unwound too quickly.

Even for developing countries, which have sometimes criticized the efforts, the effects are “still positive,” she said. “Marginally, but still positive.”

But the conference, convened by the Federal Reserve Bank of Kansas City, underscored again the striking divide between academics, where skepticism is widespread about the benefits of the Fed’s asset purchases, and policy makers, where confidence is equally widespread.

The Fed has accumulated more than $3 trillion in Treasury securities and mortgage-backed securities, and since last December it has been expanding those holdings by $85 billion a month in an effort to drive down unemployment and promote growth.

The day began with a series of academic presentations criticizing the power of that approach. The most supportive said that the Fed’s purchases of Treasuries had little value, but that its purchases of mortgage-backed securities “likely have had beneficial macroeconomic effects.”

That study, by Arvind Krishnamurthy, an economist at Northwestern University, and Annette Vissing-Jorgensen, an economist at the University of California, Berkeley, still found little economic benefit in holding on to the mortgage bonds and Treasuries, a basic element of the Fed’s stimulus campaign. And it argued the Fed was undermining its own efforts by failing to articulate a clear plan for the purchases.

Policy makers tend to view these critiques as triumphs of theory over reality. They point to events in June as a kind of perverse evidence, noting that a wide range of interest rates jumped after the Fed’s chairman, Ben S. Bernanke, announced that the Fed intended to reduce its monthly asset purchases by the end of the year. The implication, they said, is that the purchases had been suppressing those rates.

“The paper doesn’t comport very well with the experience of the last couple of months,” said Donald L. Kohn, a fellow at the Brookings Institution and a former Fed vice chairman. “We’ve had a very broad set of asset price changes.”

Academic economists, in turn, say policy makers are claiming credit without presenting evidence.

While it seems clear, for example, that the Fed’s purchases of mortgage bonds have reduced interest rates on mortgage loans, some economists see evidence that current economic conditions have limited the benefits of lower mortgage rates. Banks have retained some of the benefit rather than passing it on to customers. Tighter qualification standards mean that many would-be borrowers cannot benefit from the lower rates. And those who are borrowing may not be inclined to spend more.

“Showing Fed affects interest rates doesn’t mean it automatically affects real activity,” one of those skeptics, Amir Sufi, an economist at the University of Chicago, said on Friday in an exchange of messages on Twitter. “Quantitative significance must be established.”

These debates, of course, are not merely academic. Fed officials are divided over when to begin cutting their monthly asset purchases — and when they do so, they must decide whether to buy fewer Treasuries, fewer mortgage bonds, or some combination.

Mr. Bernanke chose not to attend the conference as he prepares to step down in January, and no other Fed official spoke in his place.

Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, said on Friday that he would support a cut when the Fed’s policy-making committee meets in September as long as there was no particularly bad news between now and then.

“I would be supportive in September as long as the data that comes in between now and then basically confirm the path we’re on,” he told CNBC.

Mr. Lockhart, however, does not hold a vote on the Federal Open Market Committee this year. One official who does, James Bullard, the Federal Reserve Bank of St. Louis president, told CNBC in a separate interview that he was undecided. “I don’t think we have to be in any hurry in this situation,” he said. “Inflation is running low, you’ve got mixed data on the economy, so I’d be cautious. I wouldn’t want to prejudge the meeting.”

Policy makers from developing countries urged the Fed to clarify its plans so they can prepare for potential disruptions. Low interest rates in the developed world have sent vast quantities of money sloshing into those countries. Ms. Lagarde said that net flows to those countries had risen by $1.1 trillion since 2008, about $470 billion above expectations based on long-term trends.

As rates rise, history suggests that some of the money may come sloshing back, with hugely disruptive consequences.

Investors already are selling foreign currencies and buying dollars in the expectation that the Fed will begin to decelerate its stimulus campaign, allowing the dollar to strengthen. The Indian rupee lost 4 percent of its exchange value in about a week, prompting the Reserve Bank of India to impose restrictions last week on the outflow of money.

Agustín Carstens, governor of the Bank of Mexico, said, “Advanced country central banks should mind the spillover effects of their actions.” He added, “Otherwise the crisis will be reactivated with new actors.”

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Consumer Debt Dropped in the Second Quarter

Americans trimmed their overall indebtedness in the latest quarter, continuing a nearly five-year trend as mortgage balances fell further, data from the Federal Reserve Bank of New York showed on Wednesday.

Total consumer debt stood at $11.15 trillion in the second quarter, down 0.7 percent from the previous quarter, the New York Fed said in its quarterly household debt and credit report.

While student debt and auto loans rose, the country’s postrecession deleveraging cycle appeared intact as household delinquency rates dropped to 7.6 percent in the three months to June, from 8.1 percent in the first quarter of the year.

Americans have consistently deleveraged in the years since the housing collapse and financial crisis, and credit is now well below the peak of $12.68 trillion in the third quarter of 2008.

The Fed bank acknowledged the overall trend but highlighted a $20 billion increase in auto loan balances, the ninth consecutive quarterly rise, reflecting a rebound in a crucial sector of the American economy. Loan originations in this area reached $92 billion, the highest level since 2007.

“Although overall debt declined in the second quarter, households did increase nonhousing debt, led by rising auto loan balances,” Andrew Haughwout, a New York Fed research economist, said in a statement. “Households improved their overall delinquency rates for the seventh straight quarter, an encouraging sign going forward.”

Reflecting another national trend, student debt rose again, with outstanding balances up $8 billion to $994 billion in the second quarter. Still, student loan delinquency rates improved with 10.9 percent of loans behind by 90 days or more, down from 11.2 percent in the first quarter.

The report also showed outstanding mortgage balances fell by $91 billion to $7.84 trillion, while 1.5 percent of existing mortgages fell into delinquency. Mortgages are by far the largest segment of consumer debt.

Lenders made more mortgages, with originations rising to $589 billion.

Elsewhere, credit card balances edged up by $8 billion, while the number of credit account inquiries over six months, an indicator of consumer credit demand, was flat at 159 million.

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Markets Turn Positive on Fed Official’s Remarks

Stocks erased losses to trade higher Tuesday afternoon after a Federal Reserve official said economic data remained too mixed for policy makers to lay out a detailed path for reducing and eventually halting the central bank’s asset-purchase stimulus plan at their September meeting.

In afternoon trading, the Standard Poor’s 500-stock index was 0.3 percent higher, the Dow Jones industrial average gained 0.4 percent and the Nasdaq composite was 0.3 percent higher.

The remarks were made by Dennis Lockhart, president of the Federal Reserve Bank of Atlanta. The speech appeared to reassure investors fearing that the Fed would soon taper its asset purchases, which total $85 billion a month. The markets, which had been lower through the morning, quickly turned positive.

Homebuilder stocks, however, came under pressure as government bond rates rose, making mortgages less affordable.

PulteGroup, a home construction company, fell 2.3 percent, and another homebuilder, Lennar, fell 2 percent.

Airline stocks fell after the Justice Department filed suit to block the merger of US Airways and American Airlines parent AMR Corp.

US Airways fell 10.1 percent. Shares of Delta Air Lines fell 9 percent and United Continental stock dropped 6.1 percent.

The market “is a lot like yesterday with traders seeing low volume. But the good news is we’re not seeing a massive sell-off and the general tone of the markets is still positive,” said Ryan Detrick, a senior technical analyst at Schaeffer’s Investment Research in Cincinnati.

He said the current trend could continue until September.

J.C. Penney shares fell after initially rising on news that William A. Ackman, the activist investor, had resigned from its board on Monday.

“This is a clear victory” for the board the chief executive, Myron Ullman, said Steve Kernkraut, a portfolio manager at Durban Capital in New York. “It also gives the board a reasonable time frame to recruit a long-term C.E.O.”

“Many C.E.O. candidates would refuse to work with Ackman on the board, so this clears the deck,” he added.

J.C. Penney shares resumed their downward trajectory, falling 3.1 percent.

Shares of travel Web site Orbitz were down over 12 percent after one of its largest investors, PAR Capital Management, said it sold 8.1 million of its 24.6 million-share stake in the company. Orbitz was the biggest percentage loser on the New York Stock Exchange.

The Commerce Department said retail sales rose 0.2 percent in July, while a narrower gauge — retail sales excluding cars, gasoline and building materials — rose at its fastest pace in seven months.

The core retail sales number could signal quicker economic growth and strengthen the case for the Federal Reserve to curtail stimulus efforts in September.

Even though the S. P. has fallen in five of the past six sessions, the average is just 1.6 percent from an all-time closing high reached on August 2. Since July 11, the S. P. has traded in a narrow range of about 2 percent.

Yum Brands fell 2.7 percent a day after the fast food chain operator said July China sales slid 13 percent.

Eli Lilly and Company rose 4 percent after it said its experimental lung cancer drug increased survival in a late-stage trial.

Digital Generation soared 23 percent a day after it agreed to sell its television business for $485 million.

Overseas shares were higher. The FTSE Eurofirst 300 index of blue chip European stocks ended the trading session up 0.6 percent. In Asia, Japan’s Nikkei closed up 2.6 percent, and China’s Shanghai composite rose 0.2 percent.

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Wall Street Posts Worst Week Since June With Fed in Mind

All but one of the 10 SP 500 sector indexes ended lower.

The stock of J.C. Penney Co. skidded 5.8 percent to $12.87 and ranked as the SP 500’s biggest percentage decliner. Bill Ackman, the company’s top investor, urged the retailer’s board on Friday to replace its chairman.

Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated late Thursday that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.

The lack of clarity over the Fed’s plans gave investors reason to pull a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week ended August 7, data from Thomson Reuters’ Lipper service showed on Thursday.

“People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy,” said Michael Sheldon, chief market strategist at RDM Financial, in Westport, Connecticut.

The Dow Jones industrial average dropped 72.81 points, or 0.47 percent, to end at 15,425.51. The Standard Poor’s 500 Index declined 6.06 points, or 0.36 percent, to 1,691.42. The Nasdaq Composite Index fell 9.02 points, or 0.25 percent, to close at 3,660.11.

For the week, stocks posted their biggest declines since mid-June. The Dow fell 1.5 percent, snapping a six-week string of gains. The SP 500 dropped 1.1 percent for the week and the Nasdaq slid 0.8 percent.

A week ago, both the Dow and the SP 500 ended at record closing highs.

Stocks extended losses late in the session. President Barack Obama said he will make a decision on the nomination for the Federal Reserve chairman in the fall. Fed Chairman Bernanke is expected to step down when his second four-year term ends on January 31.

Bernanke rattled markets in late May by saying the Fed would begin to ease back on its stimulus program once the economy shows some improvement.

While many investors are concerned that economic growth will stall without the Fed’s help, stock prices have been supported by some strong earnings and encouraging data overseas.

The SP 500 is up 18.6 percent for the year so far.

In China, industrial output rose more than expected, adding to a string of data that indicated the economy may be stabilizing after an extended period of tepid growth.

U.S. economic data showed wholesale inventories unexpectedly fell 0.2 percent in June, marking a second straight month of declines, versus expectations calling for a gain of 0.4 percent.

U.S.-listed shares of BlackBerry Ltd jumped 5.7 percent to $9.76 after Reuters reported that the Canadian smartphone maker was warming to the idea of going private, citing sources familiar with the situation. Inc, rose 3.9 percent to $969.89 a day after the online travel company reported earnings that beat expectations and gave a strong outlook. Some analysts speculate the stock’s price will cross $1,000 soon, which would be a first for a Standard Poor’s 500 stock.

Earnings season is winding down, with 446 companies in the SP 500 having already reported. Of those, 68 percent have exceeded analysts’ expectations, slightly above the 67 percent beat rate over the past four quarters, Thomson Reuters data showed.

Volume was roughly 5.3 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.36 billion this year.

Decliners slightly outnumbered advancers on the NYSE by a ratio of about 15 to 14. On the Nasdaq, about three stocks fell for every two that rose.

(Editing by Nick Zieminski and Jan Paschal)

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Borrowing by Consumers Rose in June, Fed Reports

Consumers increased their borrowing by $13.8 billion in June from May, to a seasonally adjusted $2.85 trillion, the Federal Reserve said on Wednesday in its monthly report on consumer credit.

The category that includes credit card use dropped $2.7 billion in June. That followed a gain of $6.4 billion in May. Still, overall credit card debt remained 16.5 percent below its July 2008 peak.

Borrowing for autos and student loans rose $16.5 billion in June. These gains have lifted overall consumer credit to record levels in all but one month since June 2011.

And since January 2011, the measure of student and auto loans has risen $312.6 billion. During that same two-and-a-half-year period, credit card debt rose only $16 billion.

The Fed’s report does not separate student loans and auto loans. But the Federal Reserve Bank of New York tracks consumer credit on a quarterly basis and its reports show that student loan debt has been the biggest driver of borrowing since the recession officially ended in June 2009, partly because many unemployed Americans have returned to college.

More credit card borrowing could bolster consumer spending, which accounts for about 70 percent of economic activity. But many consumers have been hesitant to run up high-interest debt.

The economy grew at a lackluster annual rate of 1.4 percent in the first six months of this year. Many economists forecast that growth will accelerate to a rate of around 2.5 percent in the second half of this year, as the impact of higher Social Security taxes and spending cuts begins to fade. Hiring gains are also expected to increase consumer income, supporting more spending.

The Fed’s report excludes mortgages, home equity loans and other loans related to real estate.

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Tapering of Stimulus Could Start as Soon as September, 2 Fed Presidents Hint

Charles L. Evans, the president of the Federal Reserve Bank of Chicago, said he would not rule out the possibility that the Fed could start tapering as early as next month.

The remarks came at a breakfast with reporters in Chicago and echoed through the markets during the day, because Mr. Evans is a voting member of the Federal Open Market Committee, which sets Fed policy, and because he has generally supported more aggressive efforts to stimulate the economy in the past.

In a separate interview with Market News International, the president of the Federal Reserve Bank of Atlanta, Dennis P. Lockhart, also indicated a September move was an option. Mr. Lockhart is not a voting member of the committee, however, so his comments carry a bit less weight than those of Mr. Evans.

On Wall Street, which has benefited from the Fed’s accommodative stance, stocks dropped after the comments, and major market indexes closed lower by a little more than half a percentage point.

The Fed and its chairman, Ben S. Bernanke, have signaled that the central bank’s policy of buying $85 billion a month in government bonds and mortgage-backed securities will be wound down if the economy improves further and unemployment continues to fall.

Mr. Bernanke has said he envisions the stimulus program coming to an end by the middle of next year if unemployment falls to about 7 percent. Last Friday, the Labor Department reported that unemployment in July fell to 7.4 percent, from 7.6 percent in June.

Mr. Bernanke has not said, however, when the tapering will begin, only that the speed and timing of any easing is contingent upon continued signs of strength in the economy.

Traders and economists expect bond purchases to be reduced before the end of 2013, but opinion is divided about whether that will start as early as next month or come as late as December.

The Fed’s ultimate decision will have wide-reaching impact. The Fed’s aggressive bond buying has helped keep long-term interests rates low; mortgage rates have risen by roughly a full percentage point since Mr. Bernanke first raised the possibility of tapering in May. In addition, the stimulus has also helped prop up the big rally on Wall Street.

While the remarks by Mr. Evans and Mr. Lockhart on Tuesday did not resolve the debate, their tone suggested that tapering was indeed on the horizon if the economy held up.

“Adjustments to asset purchases are going to be conditional on our outlook materializing,” Mr. Evans said. “It’s going to be data-dependent.”

“I do expect though that the outlook will materialize, and we are quite likely to reduce the flow purchase rate starting later this year — couldn’t tell you which month that will be — and it’s likely to wind down, over time, in a couple or a few stages,” he said.

In terms of September, Mr. Evans said, “I clearly would not rule it out, it’s going to depend on the data — the data have been not so bad.”

For his part, Mr. Lockhart, the Atlanta Fed president, also said there was plenty of wiggle room for the central bank, depending on how economic growth shaped up over the coming months.

If growth turns out to be weaker than expected, he said, a reduction in stimulus efforts could be put off.

“If we see a deterioration from this point, and I would say my more realistic fear is just a kind of ambiguous picture of mixed data that signal neither accelerating strength nor necessarily deterioration, but that kind of moping along in the middle, then I think it’s not a foregone conclusion that the asset purchase program should be removed or removed rapidly,” he said.

Dean Maki, chief United States economist at Barclays, said: “Neither Fed president was willing to commit to September nor rule it out. What this is telling us is the F.O.M.C. is keeping its options open and awaiting further data.”

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Fed Meeting Ends With No Sign of New Direction

The Fed acknowledged the weak pace of growth during the first half of the year, describing the rate as “modest” rather than “moderate,” but maintained its forecast that “economic growth will pick up from its recent pace,” according to a statement published after the committee’s two-day meeting.

The Fed also noted the sluggish pace of inflation, which has dropped to the lowest pace on record, but said that it continued to expect a rebound.

As usual, the Fed maintained its flexibility, noting that it was ready to increase or decrease its stimulus campaign as warranted by economic conditions.

The decision was supported by 11 of the 12 members of the Federal Open Market Committee. The sole dissenter was Esther L. George, president of the Federal Reserve Bank of Kansas City, who has dissented at each meeting this year, citing the risks of financial destabilization and higher inflation.

The committee had little time to digest the latest economic data. The government announced earlier Wednesday that the economy expanded at an annual rate of 1.7 percent in the second quarter, better than economists had expected but below the pace that Fed officials regard as necessary to create enough jobs to bring down the unemployment rate. The Fed has predicted faster growth in the second half of the year.

The Fed’s chairman, Ben S. Bernanke, surprised investors after the committee’s last meeting in June by announcing that the central bank expected to reduce the volume of its monthly asset purchases later this year, and to end the purchases by the middle of next year, provided that economic growth met the Fed’s expectations. The central bank has increased its holdings of mortgage-backed securities and Treasury securities by $85 billion a month since December.

Interest rates rose in response, undermining the purpose of the bond-buying program, but Fed officials have not backed away from that timeline. Mr. Bernanke and others have said that if the economy needs more help, they would rather lean on other tools, like the policy of holding short-term interest rates near zero.

The Fed has said that it intends to maintain that policy at least as long as the unemployment rate remains above 6.5 percent and likely for some time thereafter as long as inflation remains under control. The rate was 7.6 percent in June.

Mr. Bernanke described this as “a change in the mix of tools” in testimony before the House Financial Services Committee earlier this month.

The shift in strategy appears to reflect a reassessment of the potential costs of asset purchases. A number of Fed officials have expressed concern that the bond-buying could destabilize markets, for example by reducing the supply of low-risk assets, thus distorting prices or encouraging speculation. Other economists, including Lawrence H. Summers, a leading candidate to succeed Mr. Bernanke at the Fed, have expressed similar concerns about the purchases.

The Fed has also faced persistent questions about the benefits of the purchases. Mr. Bernanke and his allies say the bond-buying, by reducing borrowing costs, has contributed to a recent rise in home and auto purchases. Other economists, however, regard these effects as minor at best.

Fed officials and supportive economists also have suggested that the central bank’s asset purchases are valuable in convincing investors that the central bank is maintaining its long-term commitment to suppressing borrowing costs. As long as the Fed is buying bonds, it is not about to start raising rates.

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Fed Officials Play Down Fears of Quick Retreat on Stimulus

The officials, including William C. Dudley, president of the Federal Reserve Bank of New York, said that the Fed sees reason for optimism about economic growth, but that the goals of its stimulus campaign and the likely timeline remain unchanged.

The remarks, delivered in separate but similar speeches, reflected the Fed’s frustration with a tightening of financial conditions that began in May and accelerated last week after the Fed’s chairman, Ben S. Bernanke, said stronger economic growth likely would allow the Fed to reduce its monthly bond purchases later this year.

Wells Fargo, the nation’s largest mortgage lender, has raised its standard interest rate on 30-year loans from 3.9 percent to 4.625 percent. Yields on junk bonds have jumped 2 percentage points in less than two months, according to Barclays. Governments are facing higher borrowing costs to fund infrastructure projects.

“Market adjustments since May have been larger than would be justified by any reasonable reassessment of the path of policy,” Jerome H. Powell, a Fed governor, said in Washington. “In particular, the reaction of the forward and futures markets for short-term rates appears out of keeping with my assessment of the committee’s intentions.”

On Thursday, Wall Street stock indexes — already up strongly before the speeches — added to their gains for a rise of about 1 percent. Yields on 10-year Treasury bonds fell 5.8 points to 2.478 percent.

The message delivered by the three officials combined reassurance and tough love. While insisting that the Fed would not allow the broader economy to falter, they reiterated that they do not see a need to continue the present level of support for much longer. And they said that a certain level of negative reaction from investors was a predictable and perhaps necessary part of the readjustment process.

“It’s important not to overinvest in what the markets have done,” Mr. Dudley said. While the Fed would pay close attention to financial conditions, which can affect the broader economy, he said, the pace of growth would be determined by the sum of a strengthening private sector and a shrinking public sector. He said he was optimistic that by next year the result would be increasingly strong growth.

The Fed is struggling in a world of its own creation. The central bank, seeking new ways to stimulate the economy, has sought increasingly to manage investor expectations about the path of monetary policy. By convincing investors that it will keep interest rates low tomorrow, it can reduce borrowing costs today.

In essence, the Fed is asking investors to stake vast amounts of money on the proposition that it will do what it says. And investors, not surprisingly, have become increasingly paranoid about any sign that the Fed may change its plans.

The latest round of trouble began when Mr. Bernanke said that the Fed intended to reduce the volume of its monthly bond buying later this year. It currently buys $85 billion a month in Treasury securities and mortgage-backed securities, and officials are concerned that the purchases are destabilizing financial markets.

Mr. Bernanke insisted that the Fed was not altering its primary stimulus program, its stated intention to hold short-term interest rates near zero at least as long as unemployment remains above 6.5 percent and inflation stays under control.

But investors, wrote Jan Hatzius, chief economist at Goldman Sachs, “seem to believe that Fed officials must have become at least somewhat more willing to consider earlier hikes if they are sufficiently comfortable with the economic outlook to preannounce” the reduction in monthly bond buying.

Perhaps most strikingly, market pricing has shifted to reflect an expectation that the Fed will begin to raise interest rates by the end of 2014, despite the fact that 15 of 19 Fed officials indicated last week that they did not expect an increase until 2015.

“Some commentators have interpreted the recent shift in the market-implied path of short-term interest rates as indicating that market participants now expect the first increases in the federal funds rate to come much earlier than previously thought,” Mr. Dudley said in New York. “Such an expectation would be quite out of sync with both F.O.M.C. statements and the expectations of most F.O.M.C. participants,” he added, referring to the Federal Open Market Committee.

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Off the Charts: Younger Households Are Slower to Make Gains in Net Worth

The Fed said last week that household wealth rose by $3 trillion in the first quarter, to $70.3 trillion. It was the first time the total exceeded the $68.1 trillion total posted in the third quarter of 2007, before the recession began, and was the largest quarterly increase since 1999, when the stock market was rising rapidly.

In the first quarter, a third of the gain in wealth came directly from rising values of corporate stocks owned by households. That was a little more than the gain attributed to rising real estate values.

The Federal Reserve Bank of St. Louis pointed out that there are more households now than there were in 2007, and that there has been inflation as well. As can be seen in an accompanying chart, the average household wealth at the end of the quarter was $613,635, a figure that is 11 percent below the peak of $689,996 (in 2013 dollars) set in the first quarter of 2007.

Those averages are deceptive, in that they are raised by the high wealth of a relatively small number of households. A very different picture emerges from looking at the median — the level at which half the households are richer and half poorer. That statistic can be calculated from the Fed’s triennial survey of consumer finances. In the studies conducted in the 1990s, the median net wealth was about one-quarter of the average. In the 2000s, the median fell to about one-fifth of the average, and in 2010, it was down to about one-sixth of the average.

During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, “exactly the people you would think need to act conservatively were doing the opposite.” Homeownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.

Mr. Emmons compiled average wealth figures for different groups from the triennial surveys, and estimated how they have changed since the 2010 survey. The charts also show the results based on age. While all age groups have yet to recover to their 2007 wealth, when adjusted for inflation, older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. But the decline is nearly 40 percent for the younger group.

During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards.

Floyd Norris comments on finance and the economy at

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Economix Blog: Long-Term Jobless: Still a Bleak Picture

Long-term unemployment remains a very dark shadow in the May jobs report: 4.4 million workers have been out of a job for more than six months. In essence, the job market has normalized for the short-term unemployed. But the longer you have been out of a job, the bleaker the picture gets.

The number of people who report being out of work for less than five weeks has returned to almost the same level as in 2007. But the number of people unemployed 5 to 14 weeks is about 25 percent higher. For those out of a job 15 to 26 weeks, it is 78 percent higher. And the number of long-term jobless, those unemployed for more than 27 weeks, is a whopping 257 percent higher.

The long-term unemployed are struggling mightily to get rehired, as confirmed by recent research by Rand Ghayad and William Dickens of the Federal Reserve Bank of Boston. Some economists have theorized that the unusually long spells of unemployment we have seen in the wake of the recession are caused by a “mismatch”: The long-term jobless were in obsolete professions, with obsolete skills, and that is why they are not getting new gigs.

But Mr. Ghayad and Mr. Dickens argue that is not the case. The long-term jobless seem to be having trouble finding work across industries, for instance. Discrimination does seem to be a major factor, though: Employers simply do not want to hire the long-term jobless, as my colleague Catherine Rampell has reported and further research by Mr. Ghayad has shown.

Granted, the number of long-term jobless has come down sharply over the last three years, declining to a current level of 4.4 million from a high of 6.7 million in early 2010. Much of that reduction came about because the long-term jobless found jobs — it is not just about workers dropping out of the labor force. Still, the reality remains that the longer a worker is out of a job, the slimmer and slimmer the chance of being rehired.

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