- Net worth for the typical U.S. household grew 37%, after inflation, from 2019 to 2022, according to the Federal Reserve’s triennial Survey of Consumer Finances, issued Wednesday.
- The pandemic-era government stimulus and higher home and stock prices drove that growth to its highest level ever.
- However, not all groups had similar wealth growth, and significant wealth disparities continue. Poverty also increased in 2022.
The average family’s net worth increased during the epidemic, owing mostly to increasing housing and stock values and government stimulus efforts, according to the Federal Reserve’s triennial Survey of Consumer Finances released Wednesday.
Net worth is the value of a household’s assets after deducting obligations. After accounting for inflation, the median net worth increased by 37% from 2019–22, according to the Fed.
That percentage increase was the most since the Federal Reserve began its contemporary poll in 1989. It was also more than double the next-largest rise on record: from 2004 and 2007, just before the Great Recession, real median net worth grew 18%.
Net worth increases were “near universal across different types of families,” according to the Fed.
“Americans got a lot wealthier during the pandemic,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi attributed this to the Federal Reserve’s decision to cut interest rates to near-zero levels at the start of the pandemic, which reduced borrowing costs for consumers. An increased social safety net reduced the likelihood of people incurring debt. When it became evident that the US economy would recover swiftly from the early pandemic shocks because of government assistance and vaccines, asset prices such as stocks and homes “took off,” according to Zandi.
Of course, not everyone received equal benefits. According to the Federal Reserve, households in the bottom 20% of income do not typically own assets such as homes and equities.
And wealth disparities remain wide: families in the bottom 25% of wealth had a median net worth of $3,500 in 2022. The top 10% accumulated $3.8 million.
“Those with a high net worth in America continue to grow, while those without a net worth are making little progress,” said certified financial planner Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta and a member of CNBC’s Advisor Council.
Home and stock values have increased dramatically.
To support households during the epidemic, an unprecedented amount of federal relief was distributed, including stimulus checks, expanded unemployment benefits, and child tax credits. The government also took steps to reduce financial difficulties, such as suspending student loan payments and interest.
According to Fed data, the average family’s “transaction account” balances, which include checking, savings, and money market accounts, increased by 30% between 2019 and 2022 to $8,000.
At the same time, the prices of financial assets such as homes and stocks rose dramatically.
Those with a high net worth in America continue to grow, while those without a net worth are making little progress.
For example, the median net worth of a house increased by 45% to $201,000 in 2022 from $139,100 in 2019, according to the Fed. From 2019 to 2022, the S&P 500 stock index increased by almost 20%. According to Fed data, average retirement account balances, such as 401(k)s and individual retirement accounts, increased by 15% to $86,900.
Not only did stock prices rise, but more people began investing. Direct stock ownership climbed “markedly” between 2019 and 2022, from 15% to 21% of families, the Fed reported, the greatest gain on record.
The racial wealth gap narrowed but remains significant
The Fed reported that during that three-year period, the racial wealth disparity also shrank as home, stock, and business ownership increased relatively more for non-white families than for white families.
Nevertheless, these disparities remain substantial: according to the Federal Reserve, the average wealth of a white family was approximately six times that of a black family and five times that of a Hispanic family.
The Fed further stated that black and Hispanic families’ wages experienced a stagnation in income during the period of 2019–22 due to inflation.
There are also indications that, despite the socioeconomic gains of the pandemic era, many families are failing. The Census Bureau reports that the poverty rate increased by 0.6 percentage points from the pre-pandemic rate in 2019 and 4.6 percentage points from 2021 to 12.4% in 2022. (The aforementioned poverty rate is indicative of the Supplemental Poverty Measure, an income indicator that incorporates government assistance such as housing subsidies and food stamps.)
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Concurrent with the advent of the 40th year of inflation in 2022, the social safety net that had been expanded during the pandemic era has largely diminished.
Zandi stated that household wealth most likely peaked in the middle of 2022.
Zandi speculated that if the Federal Reserve conducted another survey today, they would discover that net worth has decreased, especially among those in the lowest income brackets, in part due to their increased debt burdens. Since government assistance ceased, they have engaged in substantial financing activities.
What are the contributing factors to the increase in net worth in the United States?
The increase in net worth in the United States can be attributed to the following factors:
- Asset Growth: Asset growth, specifically gains in property values and the stock market, was the primary driver of the increase in net worth. The Federal Reserve’s Survey of Consumer Finances revealed that between 2019 and 2022, the median net worth of American households increased by 37% to $192,900. Additionally, the mean net worth experienced a 23% surge, reaching $1,063,700.
- Government Stimulus: The substantial increase in net worth was also substantially influenced by the unprecedented government stimulus implemented during the pandemic era. The stimulus measures established the foundation for 2023 to witness economic resilience.
- Homeownership Rate: During that three-year period, the homeownership rate experienced a marginal increase, reaching 66.1%. Additionally, the median net housing valuation for families who owned homes climbed from $139,100 in 2019 to $201,000 in 2022.
- Wealth disparities: Following the pandemic, the top 1% of families’ concentration of net worth has increased.
It is crucial to acknowledge that there were significant disparities in wealth growth among different groups, and substantial wealth inequalities continue to exist.
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