The Economic Recession and Texas

The Federal Reserve has determined that household net worth – all the things of value a person has like houses and checking accounts – dropped nine percent in the last three months. This is the biggest quarterly decline in over fifty years. Things seem bad for the average American these days, but nine percent is nothing compared to the 25% drop in wealth of Dell Inc. CEO Michael Dell.

What’s even more interesting is, despite losing billions of dollars last year, Dell actually moved up 15 spots in the list of the world’s billionaires. Forbes’ annual list of all the world’s billionaires was shorter this year and added up to a quite a bit less money. According to an Austin-American Statesman article this week, compared to last year’s list of 1,125 billionaires there were only 793 making the list this year. The worth of the world’s billionaires was nearly half of what it was last year, dropping from $4.4 trillion to $2.4 trillion.

The average American struggling to make ends meet probably doesn’t feel much sympathy for the “struggling” billionaire. However, losing $18 billion dollars can’t feel that great to Microsoft Corp. founder Bill Gates. In Gate’s case, this could mean millions less available for his many charitable contributions, not just a little less caviar in the pantry.

The household net worth of Americans has dropped for the sixth straight quarter after reaching a historical high of $64.36 billion in mid 2007. The household net worth is nationally 20 percent below that peak right now. Most Americans feel this drop acutely as paychecks and bank accounts are shrinking.

The unemployment rate is above 10 percent in states like California, South Carolina and Rhode Island. Michigan has the nation’s highest jobless rate at 11.6 percent. Texas has been fortunate to have seen some job growth in the last year, keeping the state unemployment rate under seven percent. It is slightly lower for the Austin metro area. The national unemployment rate was 8.1 percent in February.

There was a little good news this week as Citigroup reported a modest profit, causing the stock market to rebound. Both JPMorgan Chase and Citigroup operated at a profit in January and February, a first since 2007. The stock market has remained steady on the hopefulness of the good news this week after weeks of record lows.

But it seems for the most part the news remains grim as companies continue to cut jobs. President Obama said this week that things are not as bad as people think. He is afraid that the nation is working under a “Chicken Little” mentality right now when they should be looking to future with more confidence. While there may be some disparity between the reality versus the perception of this recession, there is no arguing that the financial landscape is different for everyone these days. From the billionaire on down, the bank statement doesn’t look as good as it has in years past.

Texas was one of the last states to start feeling the squeeze of this recession and our rugged landscape in many ways remains relatively unchanged. As home prices in the Austin real estate market have started to slide down and unemployment has started to creep up, the area continues to show its resilience. This week is a good example, as drought conditions get a little break with some rain and Austinites celebrate South By Southwest, the future may seem a little more hopeful. It’s all relative.

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