US households saw the biggest jump in their wealth between 2019 and 2022 as rising stock indexes, rising home prices and repeated rounds of government stimulus kept people’s finances healthy, according to Federal Reserve data released Wednesday. has made it.
After adjusting for inflation, the average net worth increased 37 percent over those three years, according to the Fed. survey of consumer finance Shown – the largest surge on record dating back to 1989. Additionally, median household income increased by 3 percent between 2018 and 2021 after subtracting price increases.
While the income gains were most pronounced for the wealthy, the data clearly showed that Americans have made virtually no overall financial progress in the three years that included the pandemic. Savings increased. Credit card balance dropped. Retirement accounts swelled.
Other data from both government and private sector sources have indicated those benefits. But the Fed report released every three years is considered gold standard in data About the financial circumstances of the families. It provides the most comprehensive snapshot of everything from savings to stock ownership across racial, wealth and age groups.
It is the first time since the onset of the coronavirus that the Fed report has been released, and it outlines how households have fared during the tumultuous economic period. A large number of people lost their jobs in early 2020 and the government tried to cushion the blow with several relief packages.
Recently, the job market is is boomingVery low unemployment and fast wage growth have helped boost incomes. At the same time, high inflation has eroded some of the benefits by making everyday life more expensive.
For example, without adjusting for inflation, average incomes would have increased 20 percent, based on the report released Wednesday.
Compared with the previous recession, which ran from 2007 to 2009, financial progress has been remarkable, especially for poor households. It took years for household wealth to fully recover after that crisis, and for some families it never happened.
Incomes rose across all groups between 2019 and 2022, although the gains were greatest towards the top – meaning income inequality increased.
This led to a huge gap between the average income – the number at the midpoint of all households – and the average, which adds up all earnings and divides them by the number of households. Median income increased 15 percent, one of the largest three-year pops on record.
Wealth inequality was more complex. Because the rich hold such a large share of financial assets in America, the wealth gap begins to widen in absolute terms when the prices of stocks, bonds, and homes are climbing. It is true that the wealth of wealthy families grew much more in dollar terms.
But over the three years covered by the survey, the increase in wealth for poor households was actually the largest in percentage terms. The net worth of people in the bottom quarter was $3,500 in 2022, up from $400 in 2019. Among the top 10 percent of households, the average net worth rose to $3.79 million, up from $3.01 million three years ago.
Because of the way the data is measured, it is difficult to know how much pandemic-related payments would have mattered in the figures. To the extent that households saved one-time checks and other aid they received during the pandemic, they would have been included in measures of net worth.
When income measures were collected in 2021, households were still receiving some pandemic payments, meaning things Advanced Unemployment Insurance Possibly included in the data.
Some Americans appear to be taking advantage of their improved financial situation to invest in stocks for the first time: 21 percent of households directly owned stocks in 2022, up from 15 percent in 2019, the largest increase on record. There is change. It appears that many of those new stock owners are relatively small investors, which likely reflects at least some degree of Americans’ enthusiasm for “meme stocks” like GameStop during the pandemic.
Newly released data from the Fed shows that dramatic gaps in income and wealth remain across racial groups, although Black and Hispanic households saw the largest percentage gains in net worth during the pandemic period.
The average net worth of black households increased 60 percent to $44,900. This was an even bigger jump than the 31 percent increase for white households, which increased their household wealth to $285,000. Hispanic households saw a 47 percent increase in their net worth.
At the same time, racial and ethnic minorities saw slower income growth over the 2021 period. Black and Hispanic households saw small declines in earnings after adjusting for inflation, while white households saw small increases.
For the first time, the report included data on Asian families, who had the highest average net worth of any racial or ethnic group.
Although the data in the report is a bit old, it underscores how strong a position American families were in as we emerged from the pandemic. Solid net worth and rising incomes have helped people continue spending through 2023, helping the economy grow at a solid pace even at a time when the Fed is raising interest rates to cool it.
That flexibility has raised hopes that the Fed might be able to make a “soft landing,” in which it slows the economy gently without crushing consumers so that the U.S. sinks into recession.