WASHINGTON - Americans are climbing further out of the hole they sank into during the Great Recession.
A stock rally at the end of 2011 helped rebuild more of their lost wealth - a trend that carried into 2012. Households responded by borrowing more for the first time since the financial crisis began, even as home values fell further.
Household wealth rose 2.1 percent to $58.5 trillion in the October-December quarter, the most in a year. Still, it would have to rise 13 percent more to regain its prerecession peak.
Americans’ stock portfolios rose nearly 10 percent last quarter to drive the gains. And stocks have increased even further since then. The Standard & Poor’s 500 index has jumped 24 percent since early October.
Neerja Pahwa is sensing a difference.
Pahwa, a flight attendant and fragrance consultant from St. Louis, still has not recouped all of her investment losses suffered during the recession. But she is secure enough with her finances to eat out and stop by Starbucks more frequently. And she recently made a down payment on a retirement home in Florida.
“Things are looking brighter and sunnier,’’ said Pahwa, 64, who hopes to retire next year if the economy keeps improving. “I don’t have too much in my pocket. But I know it’s coming. Things are only going to get better.’’
Household wealth, or net worth, is the value of assets like homes, bank accounts, and stocks, minus debts like mortgages and credit cards. It bottomed out during the recession, at $49 trillion in the first quarter of 2009. But it is still below its prerecession peak of $66 trillion.
Greater net worth can boost the economy. When people feel wealthier, they spend more. That speeds up growth and businesses respond by stepping up hiring and expansion plans.
Arash Shirazi is spending again after cutting costs during the recession. He says his portfolio has “come back almost to what it was.’’ He is even flying to Paris and thinking about growing his business.
“Things are getting better,’’ said Shirazi, 37, who owns a music and talent agency in Washington. “I’m not going on vacations or buying new cars. But I’m definitely starting to spend a little more.’’
Corporations are also wealthier. They held a record $2.2 trillion in cash at the end of the year.
Still, few Americans are seeing returns on their biggest investment. Home values dropped 1.3 percent in the fourth quarter to roughly $16 trillion. They have now fallen nearly 24 percent since the recession began.
The housing market could pick up if the job market keeps strengthening. The economy has added 200,000 net jobs on average in each of the months from November through January, lowering the unemployment rate to 8.3 percent. Economists predict employers added more than 200,000 jobs last month, too. The government will release the February jobs report on Friday.