American households substantially bore their savings between 2016 and 2019, according to Federal Reserve data released Monday, but wealth inequality remained stubbornly high – and that was before the coronavirus pandemic took hold.
Median net worth has risen 18% over these three years, the Fed’s Consumer Finance Survey showed, as median household income rose 5%. The survey, which began in 1989, is published every three years and is the gold standard for data on the financial situation of households. It offers the most up-to-date and complete snapshot of everything from savings to stock ownership across all demographic groups.
Almost all of the data from the 2019 survey was collected before the coronavirus started. Economists fear that progress for disadvantaged workers has likely reversed in recent months, as disruptions due to the pandemic have thrown millions of people out of work. The crisis has mainly cost minority and less educated employees, who are more likely to work in highly interactive jobs at restaurants, hotels and entertainment venues. Inequality looks set to increase as lower incomes fare worse.
Employment remains markedly depressed compared to before the pandemic, leaving many families in a more precarious position. The stock market indices have rebounded, which should help support household wealth, but the benefits will mostly go to the rich. Only about half of Americans own stocks, according to the poll.
“Without a doubt, it will get worse,” said Julia Coronado, founder of MacroPolicy Perspectives and former Fed economist, about inequality. “We know that the unemployment skew is towards the low-income and more economically vulnerable people.”
Before the pandemic, Michelle Bernier was finally rebuilding after a lost decade.
Ms. Bernier, 47, was injured just before the last recession and lost her job at a nursing home in Lewiston, Me. When she was healthy enough to work again, the economy had collapsed and she and her husband had to rely on food stamps.
Last year, however, things were looking up. She had a job she loved, as a home nurse, and made $ 20 an hour.
“I was doing pretty good, not great, but pretty good,” he said. “We had our shopping, our car, our home. We had what we needed and we had extra money to play with. “
The coronavirus has erased everything. Her clients no longer wanted strangers to come to their home, which meant Ms. Bernier was out of work. The extra $ 600 weekly in unemployment benefits from the federal government kept her afloat for a while. But that supplement ended in July and she’s not sure how she’ll get along without it. The bill collectors she thought she shook are already haunting her again.
“So here I am again stuck without a job and I struggle, trying to figure out what my next career will be,” she said.
The newly released data suggests that households with lower pre-tax incomes, such as Ms. Bernier, were catching up with their wealthier counterparts between 2016 and 2019. The poorest 90% of the income distribution actually saw its share of the earnings overall increase slightly in 2019 – reversal of a decade-long decline. Even so, a Fed analysis found that the rebound occurred from all-time lows.
And even at a time when tighter labor markets were translating into more widely shared prosperity, divisions in wealth – the savings accumulated over time, rather than the money a family earns in a given year – remained high.
In 1989, the richest 1% of wealth holders held about 30% of the nation’s net worth. This rose to nearly 40% in 2016 and was little changed in the latest poll, Fed economists said.
While wealth grew slightly for those in the bottom half of the distribution, the poorest half of American households holding only about 1% of the nation’s savings in 2019, Fed data and a related report showed.
The survey’s overall wealth measure does not include defined benefit pension plans and social security benefits, which are difficult to assess. An increased measure incorporating pension plans shows that the share of wealth at the top has still increased, but less, according to a Fed report.
Only the richest 10% held more wealth in 2019 than on the eve of the recession from 2007 to 2009, on the basis of the release, although large-scale advances began to take hold.
“The belated recovery from the great recession was finally starting to help the people at the bottom a little,” said Ernie Tedeschi, political economist at Evercore ISI. The pandemic recession “is definitely a setback. I hope it’s a setback that we can get over faster than we did after the great recession. “
Financial assets have long been particularly concentrated in the hands of the wealthy and that trend continued throughout 2019. The average household with shares in the top 10% held around $ 780,000, directly or indirectly, last year. The average household in the last quarter with shares held at just over $ 2,000, the data showed.
The percentage of low-income households holding some shares increased but remained much lower than that of the wealthy. About 94% of the richest households own shares, compared with one in five households in the poorest 25%.
This means that while low-income households may have been less affected by the fall in the stock market in the spring, they did not benefit as much when prices rose this summer.
President Trump often points to stock market performance as a sign of success, but the data confirms he doesn’t talk about how much Americans are doing financially.
The data just released by the Fed they also point out that dramatic income and wealth gaps persist between racial groups. The median wealth of black households is less than 15 percent of the net worth of white households – it stood at just $ 24,100 in 2019 to $ 188,200 for white households. Hispanic families held $ 36,100.
The concern now is that inequalities could deepen as workers ultimately lose jobs and income.
The unemployment rate was 8.4% in August, according to the Department of Labor, but the rate was 13% for blacks. Similarly, the unemployment rate for those with less than a high school diploma was more than double that of adults with a college degree or more.
The survey also showed how the concentration of wealth is perpetuated across generations. In 2019, the richest 1% of households had an inheritance of $ 1.6 million. Those in the lower half of the distribution only expected $ 39,000.
“Inherited wealth can play a direct role in wealth accumulation – with up to half of total wealth attributable to intergenerational transfers,” the Fed said in a report. “Growing up in a wealthy family can also confer other indirect benefits – through social connections, for example, or family loans – that play a role in the transmission of wealth.”
Ben Casselman contributed to the report.