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Business Briefing

As millions struggle, U.S. household wealth hits record Add to ...

These are stories Report on Business is following Thursday, June 6, 2013.

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Wealth at record
Wealth in the United States has hit a milestone.

But, as always, that milestone doesn’t tell the whole story.

U.S. household net worth rose $3-trillion (U.S.) to reach a record $70.3-trillion (U.S.) in the first quarter of the year, according to fresh numbers today from the Federal Reserve.

Also notable is that this was the biggest quarterly gain since late 1999.

Household net worth – the difference between a family’s assets and liabilities – was boosted by stronger markets and higher house prices.

Stocks and mutual funds held by households increased by $1.5-trillion, the U.S. central bank said, while home values jumped by $784-billion.

At the same time, consumer debt burdens declined.

What the Fed report doesn’t show, of course, is income inequality, stubbornly high unemployment or the number of people on the equivalent of food stamps.

As The Associated Press notes, another paper by the Federal Reserve Bank of St. Louis, released just last week, underscored the troubles.

“Average household wealth in real terms, contrary to recent headlines, has not fully recovered; indeed, it is only about halfway back to prerecession levels,” said the paper by Ray Boshara, the director of the regional Fed’s Center for Household Stability, and William Emmons, its chief economist.

“While many Americans lost wealth because of the recession, younger, less-educated and/or African-American and Hispanic families lost the most, in percentage terms,” they said in their May 30 essay, adding that most households have regained less than the average.

Unemployment in the United States stands at 7.5 per cent, with almost 12 million people out of work. The number of long-term unemployed stands at 4.4 million.

And more than 46 million people are part of the Supplemental Nutrition Assistance Program, the modern day equivalent of the food stamps scheme.

Poloz in first public appearance
The new governor of the Bank of Canada sees the global recovery as “more like a postwar reconstruction” that will take time and patience.

Stephen Poloz appeared today before the Commons finance committee and, in his opening statement, at least, gave no hints and didn’t stray from the central bank’s playbook.

The global economy is still struggling, Mr. Poloz told the committee, and it will take time for a sustained rebound, The Globe and Mail's Kevin Carmichael reports.

“Global economic activity is expected to grow modestly this year before strengthening over the following two years,” he said.

“But this is not a recovery in the usual sense. It’s more like a postwar reconstruction. It will require sustained and focused efforts to rebuild global economic potential.”

While Canada came through the meltdown better than most, it was still an unusual recession, with an unusual recovery. But Mr. Poloz does see better times ahead.

“The sequence we can anticipate is the following: foreign demand will recover; our exports will strengthen further; confidence will improve; companies will invest to increase capacity; existing companies will expand and new ones will be created.”

His comments came as both the European Central Bank and the Bank of England held their benchmark rates steady at 0.5 per cent.

Public Mobile sold
The ground continues to shift under Canada’s wireless industry.

Public Mobile, one of the upstarts formed in 2008, said today it’s being taken over by two investment firms, Thomvest Seed Capital Inc., part of the Thomson family, and Cartesian Capital of New York.

This is the latest in a series of developments in the wireless world, following the Canadian government’s decision to nix a deal between Telus Corp. and troubled Mobilicity, another of the new entrants, and a new code of conduct for wireless carriers unveiled by the telecom regulator.

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