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 has 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 in the October-December quarter, the most in a year. Still, it would have to rise 13 percent more to regain its pre-recession peak. The Standard & Poor's 500 index has risen 20 percent from early October through the end of trading Wednesday.
Corporations are also wealthier: They held a record $2.2 trillion in cash at the end of the year.
Still, few Americans are seeing much return 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.
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's still below its pre-recession 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.
Consumers are regaining wealth just as the job market is strengthening. The economy has added an average of 200,000 net jobs per month 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.
The improved economic outlook has made people more willing to borrow. Household debt increased at an annual rate of 0.25 percent, the first increase since mid 2008.
Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.
Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.
Stocks have nearly doubled in three years. Thanks largely to that surge, about 95 percent of people with company-sponsored retirement savings plans have more money in their accounts than they did at the peak of the market in October 2007, according to the Employee Benefit Research Institute in Washington.
The increase in stocks has been particularly welcome for consumers because a housing recovery has yet to take root. Most homeowners have seen their equity eroded over the past five years.
Economists expect home prices to fall even further this year. Banks are expected to resume millions of foreclosures now that they have settled with state and federal officials over questionable lending practices.