Household Healing

Another important sign of economic recovery came today from the Fed’s release of household balance sheets in the Flow of Funds report for the third quarter.

Overall, household net worth rose $2.7 trillion in the third quarter. Now, we are still $12.6 trillion below the $66 trillion peak registered in the second quarter of 2007, according to Wall Street economist John Ryding. But household wealth is nearly $5 trillion above the trough registered in the first quarter of 2009. And economist Scott Grannis says that over the past six months, household debt fell by almost $60 billion, while household real-estate holdings increased by over $600 billion. Meanwhile, thanks to a strong stock market, household financial assets have jumped by $4.2 trillion since last March.

All this good news gives consumers just a bit more spending power. And the same is likely true for small businesses, which are owner-operated.

Incidentally, despite various debt warnings from Dubai, Greece, Spain, Ireland, and elsewhere, the U.S. stock market is holding close to the high ground. And believe it or not, the beleaguered U.S. dollar has stabilized — at least for the moment.

As a footnote to the economic-repair story, bullish Wall Street economist Joe LaVorgna is now predicting up to 300,000 new jobs per month in the first quarter. He bases this on recent monthly gains in temporary work hires and a jump of more than 200,000 new jobs in the small-business household survey released last week. If LaVorgna is close to being right, the unemployment rate has in fact peaked and is likely to decline in the months ahead.

Score one for the mostly free-market economy and the healing of businesses and the stock market. Despite bearishness over the dollar, an improving jobs picture in the months ahead is more likely to raise the value of the greenback. It’s not exactly King Dollar, but then again, if the Fed would quit printing free money, King Dollar could be rethroned.