March 6 (Bloomberg) -- Household wealth in the U.S. increasedfrom October through December, as gains in stock portfolios andhome prices boosted Americans’ finances.

Net worth for households and non-profit groups rose by $2.95trillion in the fourth quarter, or 3.8 percent from the previousthree months, to a record $80.7 trillion, the Federal Reserve saidtoday from Washington in its financial accounts report, previouslyknown as the flow of funds survey.

More jobs, higher stock prices and improved home values have allhelped consumers clean up their balance sheets in the yearsfollowing the biggest recession since the Great Depression.Additional gains in the labor market and household wealth will beneeded to give consumers the means to spend on goods and services,boosting economic growth.

“There will be further gains in household net worth, but maybenot at the pace we saw in 2013,” Michelle Girard, chief U.S.economist at RBS Securities Inc. in Stamford, Connecticut, said inan interview before the report. “On the equities side, it’s stillgood, but it’s less robust than last year. On the housing side, theback-up in rates takes a little bit off demand, so the pace ofprice appreciation cools a bit.”

The value of financial assets, including stocks and pension fundholdings, held by American households increased by $2.52 trillionin the fourth quarter, according to today’s Fed report.

The Standard & Poor’s 500 Index climbed 9.9 percent fromSept. 30 to Dec. 31, capping the best yearly gain since 1997.

Home Prices

An improving housing market also boosted household wealth. TheS&P/Case-Shiller national home-price index rose 11.3 percent inthe fourth quarter from the same period in 2012, the biggestyear-over-year advance since the first three months of 2006.

Household real-estate assets climbed by $401.1 billion, the datashow. Owners’ equity as a share of total household real- estateholdings increased to 51.7 percent last quarter from 50.6 percentin the previous three months.

The Fed is trying to preserve improvements in household networth by maintaining an accommodative stance, even as it scalesback its unprecedented stimulus program.

Fed Chair Janet Yellen said the central bank intends to reduceasset purchases at a “measured” pace, in testimony before theSenate last week. She also said in response to a separate questionthat the bond-buying program is likely to end in the fall. At thesame time, “if there’s a significant change in the outlook,certainly we would be open to reconsidering,” Yellen said.

Payroll Forecast

Fed policy makers will likely keep a close eye on the labormarket, where gains have been inconsistent over the past threemonths. Payrolls grew by 113,000 in January following advances of75,000 in December and 274,000 in November. They’re projected toincrease by about 150,000 in February, according to the medianestimate of economists surveyed by Bloomberg before tomorrow’sLabor Department report.

Household debt increased at a 0.4 percent annualized rate lastquarter, today’s Fed report showed. Mortgage borrowing dropped at a1 percent pace. Other forms of consumer credit, including auto andstudent loans, increased at a 5.4 percent pace.

For all of 2013, household debt climbed 0.9 percent, the biggestgain since 2007, even as Americans continued to pay down homeloans. Mortgage borrowing fell 0.8 percent, the smallest drop since2008, which marked the first year of the recession.

Total non-financial debt increased at a 5.4 percent annual pacelast quarter, the most in a year. Federal government obligationsjumped by 11.6 percent, the biggest gain since the first threemonths of 2012. Business borrowing rose 7.1 percent. State andlocal government debt dropped at a 4.9 percent pace.

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