Economic Report: U.S. household net worth has impressive gain in Q3 despite economy’s woes

What happened: On the liability side, household debt rose at a 5.6% rate in the third quarter, the fastest pace since the fourth quarter of 2007. The big driver was mortgage debt, which grew at a 5.6% annual rate. Credit-card use only rose slightly as households have not had to rely on short-term loans to get through the pandemic.

Total domestic nonfinancial company debt rose at a 5% annual rate in the third quarter, well below the 25.4% pace in the April-June quarter when the government borrowed to spend trillions to combat the recession.

Federal government debt increased at a 9.1% annual rate to $23 trillion in the third quarter, down from a record 58.9% gain in the second quarter. State and local government debt expanded at a 3.5% annual rate.

Nonfinancial business debt fell at a 0.9% rate in the third quarter compared with a 14.2% gain in the second quarter.

Big picture: The rise in household net worth is impressive but not completely good news as the pandemic is exacerbating differences between the wealthy and lower-income workers. Data on distribution is not released on a timely basis. However, the rising mortgage debt is also being carried by wealthier Americans.

What are they saying: “The effects [of the pandemic] have been, pretty much from day one, unevenly distributed. The lower earnings sector has been hit disproportionately hard,” said Richard Moody, chief economist at Regions Financial. “And those are the people who are much less likely to be benefitting from thinks like rising home prices and rising equity prices.”

Market reaction: Stocks were slightly lower in early afternoon trading on concerns about recent weak economic data with the Dow Jones Industrial Average DJIA, -0.16% down 32 points.