The Federal Reserve's latest Survey of Consumer Finances, released on Wednesday, indicated an expansion of 37% in the median net worth of U.S. households from 2019 to 2022 when adjusted for inflation. This marked the highest race ever recorded, backed by higher home and stock prices and pandemic-related government relief programs. Unfortunately, the growth was not equal for all, with already existing disparities in wealth continuing to exist and an increase in poverty in 2022.
According to a survey conducted by the Federal Reserve, the median net worth of the typical family saw a substantial surge during the pandemic due to higher home and stock prices and government stimulus measures. The 37% increase in real median net worth since 2019 was the greatest since 1989. Increases were observed across all types of families. The primary factors thought to have contributed to this growth were reduced borrowing costs following the lowering of interest rates and a more robust social safety net. However, some lower income families did not have access to the same kinds of assets which led to increased wealth.
The disparities in wealth remain vast: the median net worth of households in the lowest 25% is only $3,500 in 2022. By comparison, the top 10% have a median net worth of $3.8 million. Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta and a member of CNBC's Advisor Council, stated, "The wealthier individuals in the United States continue to accumulate greater wealth while the poorer are making very limited progress."
The pandemic caused the federal government to issue unprecedented levels of relief funds, such as stimulus checks, increased unemployment benefits and child tax credits, in order to support families. Furthermore, the government took measures to help lighten debt loads, including temporarily suspending student loan payments and interest. According to Federal data, the money held in family checking, savings and money market accounts rose by 30% to $8,000 between 2019 and 2022. Additionally, the values of assets like homes and stocks also experienced significant growth.
For example, in 2022, the median net value of a house had jumped up to $201,000 from $139,100 in 2019, representing an increase of 45%. Furthermore, the S&P 500 stock index grew approximately 20% from the end of 2019 till 2022. Moreover, the balances of the typical retirement account such as a 401(k) or individual retirement account rose 15% to $86,900, according to Federal Reserve data.Interestingly, not only did stock prices increase, but the number of people investing also rose significantly. In fact, the direct ownership of stocks by families saw a substantial increase from 15% to 21% between 2019 and 2022, which was record-breaking, said the Fed.
The racial wealth disparity decreased over the course of three years, with certain forms of asset ownership rising more for non-white families compared to white families, according to the Federal Reserve. Nonetheless, the disparities are still pronounced; the typical white family holds approximately six times the wealth of the average Black family and five times that of the typical Hispanic family. Moreover, the Fed noticed that the wages of Black and Hispanic families did not rise even after accounting for inflation across 2019-22.
There are also indications that many households are having a difficult time, despite pandemic-era wealth gains. The Supplemental Poverty Measure, which takes into account government benefits like food stamps and housing subsidies when calculating income, shows the poverty rate surging to 12.4% in 2022 — a 4.6 percentage point increase from 2021 and a 0.6 point bump from the pre-pandemic rate in 2019. Additionally, the pandemic-era social security measures had significantly weakened by the same time that inflation had risen to 40-year highs. In point of fact, Mark Zandi, Chief Economist at Moody's Analytics, believes that household wealth probably peaked in the mid-2022 period. Likewise, he believes if the Federal Reserve were to conduct a survey today the findings would display that net worth had decreased, particularly among the lowest income groups, due to the fact that their debt loads have grown significantly since the lack of government support.
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