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More Positive News For the Economy

The Federal Reserve yesterday afternoon released data on household balance sheets and income for the third quarter of 2016, and the results look favorable.  Household net worth rose to a record $90.2 trillion on gains in assets, amid modest increases in liabilities.

Equity holdings rose by $494 billion over the previous quarter, while the value of real estate grew by $554 billion. Total assets rose by $1.7 trillion. On the liabilities side, total liabilities rose by $152 billion, a 4 percent growth rate. Taking on more debt may be a sign that Americans are more confident in their own economic situation.

In another positive development, household savings rates remained at a relatively healthy level. Household savings measured in the flow-of-funds accounts tend to be volatile quarter to quarter, but on a two-year moving average basis, the household savings rate is slightly above 10 percent, well above the low of a 4.4 percent rate in 2007. But that still remains below the mid-teens rates that were prevalent from the mid-1960s through the mid-1980s.

The combination of gains in jobs and incomes, along with solid household balance sheets, rising net worth, and improving consumer attitudes are all positive developments for the economic outlook.

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