Stimulus payments to taxpayers totaling $267 billion was not enough to avoid a decline in household net worth in the first quarter on 2020, the largest drop since records began being kept in the 1950s, The Wall Street Journal (WSJ) reported.
The Federal Reserve Board’s Flow of Funds report revealed net worth among families fell to $110.8 trillion in the first quarter compared to $117.3 trillion in Q1 of last year, a 6.5 percent dip, as the pandemic caused equity prices to fall by $7.8 trillion.
The Dow Jones Industrial Average fell 23 percent in Q1, which took a toll on taxpayers' investment portfolios, WSJ reported. At the same time, the nation’s central bank said corporate debt increased by 4 percent to $16.3 trillion.
The increase in debt and decrease in household worth came as the longest expansion in U.S. history screeched to a halt earlier this year. Gross domestic product (GDP), the total value of goods produced and services provided, slipped 5 percent in Q1 as consumer spending plummeted amid shelter-in-place orders from the nation's governors, according to WSJ.
Last week, the Fed projected interest rates will remain near zero through 2022 and promised to continue supporting a U.S. economy devastated by the pandemic. The Federal Open Market Committee repeated its previous guidance that the federal fund rate will stay at a range between 0 percent and 0.25 percent until it’s confident the economy has weathered the pandemic storm and is on track to see employment rebound and prices remain stable.
“We’re not thinking about raising rates,” Fed Chair Jerome Powell said, PYMNTS reported.
WSJ reported that since April, the Treasury Department has issued $1,200 and $2,400 stimulus checks to nearly 159 million households. The CARES Act passed by Congress in March provides workers who lost their jobs due to the pandemic an extra $600 a week in unemployment benefits in addition to their regular weekly state unemployment check.
PYMNTS reported the nation’s unemployment rate fell to 13.3 percent in May as some jobs returned amid a partial reopening of the economy. The leisure and hospitality sector saw a giant leap as jobs swelled by 1.2 million, following losses of 7.5 million in April and 743,000 in March.