FORTUNE – As U.S. stocks soar to new highs, economists argue the rally makes people feel richer. And when they think they're wealthier, the theory is that they'll spend more on everything from homes to cars and clothing.
The problem with that idea is fewer and fewer Americans actually have any stake in stocks. Only about half, 52%, say they actually have money invested in equities -- the lowest level since 1998, according to a Gallup Poll released last week.
In recent years, overall stock ownership has declined. Between 1998 and 2008, Gallup found at least 60% of Americans reported they owned stock. That share fell in 2009 when the nation slipped into recession and saw the unemployment rate double. By 2012, stock ownership declined to 53%, as the unemployment rate remained elevated.
Among the hardest hit were 30-to-49-year-olds, as well as among middle-income Americans. To be sure, a steady stream of individual investors have returned to the stock market. They pumped more than $60 billion into mutual funds and ETFs that hold U.S. stocks – more than any full calendar year since 2004, according to research firm TrimTabs.
This comes as the Federal Reserve continues buying up billions of dollars worth of bonds each month, a move to stimulate the economy and get investors to take on more risks. But while stock prices soar, it may not be a big enough incentive to lure many more investors back to the market. Lydia Saad of Gallup notes that Americans' withdrawal from stocks may be correlated to high unemployment. So long as joblessness is a problem Americans may simply be unable to afford to invest in stocks. It could also be that investors still think the market is too risky after stocks nearly collapsed during the financial crisis.
In many ways, the same can be said for the nation's housing market. What's interesting is that stocks, and perhaps more so homes, are generally major sources of wealth for most Americans. Home prices have steadily risen since last year, but the share of Americans who own their homes is at its lowest level since 1995. This comes as large private investors buy up foreclosed homes at deep discounts, and as more people rent than buy.
All this says a lot about American wealth. True, higher home prices have returned many borrowers to positive equity; they now owe less on their mortgages than their homes are worth. This may give them the incentive to eventually sell and buy another home, but higher prices don't appear to have drawn many more buyers back to the market. The home ownership rate was 65% during the first three months of the year, down from 65.4% a year earlier and the lowest level since the third quarter of 1995, according to the Census Bureau's latest statistics released last month.
Like stock ownership, home ownership appears more a function of the health of the job market than any rise in prices. Which means so long as unemployment remains a problem, it puts the biggest sources of wealth farther from reach for most Americans.
According to a new report, the jobless rate for 15- to 24-year olds in the richest countries is at a decades-long high and isn't expected to drop much in the next few years.
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Buffett is worried about health care costs, not banks.
FORTUNE -- At Berkshire Hathaway's (BRKA) annual meeting on Saturday, Warren Buffett fielded questions from investors, journalists, analysts and, for the first time, invited onto the stage one investor, Doug Kass, who is betting against Berkshire's stocks. ("You haven't convinced us yet to sell our stock, but keep working," said Buffett in response to one question.) The questions ranged from those MOREStephen Gandel, senior editor - May 4, 2013 5:07 PM ET
It was a stronger-than-expected jobs report, but we're still a long way from the Federal Reserve's key target of 6.5% or lower.
FORTUNE – If the U.S. Federal Reserve's remarks earlier this week seemed at all vague, today's jobs report should give us a clearer picture of what the central bank might do next to boost the economy.
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The most recent jobs report is vindication for the Federal Reserve's caution and its bond-buying spree. But those policies aren't helping those who have been out of a job the longest.
FORTUNE – If anyone is baffled by why the Federal Reserve hasn't shut off its money spigot, even as the U.S. economy seems brighter, take a look at today's report on the state of the jobs market. It underscores the MORENin-Hai Tseng, Writer - Apr 5, 2013 10:52 AM ET
Critics of Obama's minimum wage hike say it will make it harder for employers to hire. Not too long ago, some of the biggest employers actually supported higher wages.
FORTUNE – In Tuesday's State of the Union address, President Obama promised (again) to raise the federal minimum wage to $9 from $7.25, which would boost pay for the nation's cashiers, janitors, and other low-wage workers.
Judging by failed efforts in the past, MORENin-Hai Tseng, Writer - Feb 14, 2013 11:06 AM ET
The president didn't offer much comfort to the manager and owners of American businesses who complain that high tax rates, strangling regulation, and health care reform are thwarting investment in American jobs.Feb 13, 2013 10:25 AM ET
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