Household net worth declined 0.3 per cent to $58.5 trillion in the April-June quarter, according to a Federal Reserve report released Friday. That followed three straight quarterly increases.
The value of Americans' stock portfolios fell 0.5 per cent to $8.9 trillion in the second quarter. Home values dropped 0.4 per cent to just under $16.2 trillion.
At the same time, corporations grew wealthier. They held a record $2 trillion at the end of June, an increase of 4.5 per cent from the January-March quarter.
In Canada, Statistics Canada reported this week that household net worth fell 0.3 per cent to C$184,300 in the difficult second quarter — the first decline in a year. Meanwhile, household debt to income rose to a record 151 per cent.
The April-to-May period saw stock markets tumble, eroding the value of Canadians' investments and pension plans.
Overall, U.S. household wealth, which mostly consists of home equity, stock portfolios, and other savings, has risen 15 per cent since the recession officially ended in June 2009.
The main reason for that is one of the fastest bull markets in history. Stocks have doubled in value over the past two years, according to the S&P 500 index.
But Americans' wealth has taken a hit since the second quarter. The S&P index has tumbled 11 per cent since its April peak, and 8 per cent since the end of the quarter. That could cause household net worth to drop further in the July-September quarter.
When combined with falling incomes and shrunken home values, many Americans feel poorer and have less to spend. That could slow an already-weak economy because consumer spending accounts for 70 per cent of economic activity.
Stock portfolios make up about 15 per cent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.
An estimated 88 per cent of people with 401(k) retirement savings plans now have more money in their accounts than they did at the 2007 market top, according to Jack VanDerhei of the Employee Benefit Research Institute in Washington. That's largely because of workers' continued contributions to their accounts over the past four years.
Eighty per cent of stocks belong to the richest 10 per cent of Americans, who also account for a disproportionate amount of consumer spending. The richest 20 per cent represent about 40 per cent of consumer spending.
The likely drop in wealth comes at the same time that incomes are stagnating, particularly for middle-income households. Average household income, adjust for inflation, fell 6.4 per cent last year from 2007, the year before the recession, the Census Bureau said earlier this week.
And home values have fallen sharply since the recession. That has left many people with less equity in their homes.
With files from The Canadian Press
Most economists expect home prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.
The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.