Although 1994 was a banner year for U.S. corporate profits, U.S. household wealth seems to have actually fallen. Economists at Salomon Brothers Inc. estimate that real household net worth declined by about 0.5%--only the eighth drop in 30 years.
With the Federal Reserve pushing up interest rates, the biggest hit was a 1.7% decline in real financial assets, mainly fixed-income securities in the U.S., Europe, and emerging markets. Even less volatile tangible assets, which are dominated by housing, managed to eke out an inflation-adjusted gain of only 1%. Despite a strong housing market, the median price of new homes barely kept pace with consumer inflation last year, while the real prices of existing houses slipped a bit.
Although the wealth blow was relatively modest, it helps explain the continuing economic malaise expressed by many American households.