Household Wealth Rose in Years Before Pandemic, Fed Says

U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances. As property and stock prices increased, households’ median net worth, or wealth, rose 18% to […]

U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

As property and stock prices increased, households’ median net worth, or wealth, rose 18% to $121,700 from 2016 to 2019, according to the Fed’s Survey of Consumer Finances released on Monday. The report is produced every three years.

Median household income—the level at which half are above and half are below—rose 5% to $58,600, before taxes and adjusted for inflation. The rise in incomes came as the economy grew 2.5% a year on average, inflation remained low and the unemployment rate fell.

The data suggest households were on a relatively solid financial footing headed into the coronavirus pandemic. The pandemic triggered an initial shock that hurt all aspects of the economy, including income, but government stimulus, recent improvement in the labor market and enhanced unemployment benefits have helped prop up household finances.

The most recent Commerce Department data for July show that Americans’ personal income was higher that month than in February, just before the pandemic. Household spending in July was lower than in February and Americans saved nearly 18% of their disposable personal income, more than double the rate in February.

The recession and high rate of unemployment triggered by Covid-19, the illness caused by the new coronavirus, threaten to erode income and wealth gains of recent years, economists say. Many say that government stimulus, including enhanced unemployment benefits, has helped bolster incomes and the economy.

The cushion from the government’s income support, which has recently decreased, is “definitely something to be concerned about, how that plays out going forward,” JPMorgan Chase & Co. economist Michael Feroli said.

The distribution of wealth between low- and high-income households narrowed slightly in the latest survey period, Fed economists said, a shift from the 2010-to-2016 period when incomes largely stagnated for all but the most well-off after the 2007-2009 recession.

Families in the lowest two income groups recorded large percentage increases in median net worth, suggesting the decadelong expansion benefited a wide swath of society. Net worth rose 37% to $9,800 for the lowest earners, and increased 40% to $44,000 for the second-lowest group. The median net worth of the highest and second-highest groups declined 8% and 9%, respectively.

A Fed economist said home-ownership gains and rising home prices helped boost household net worth for lower earners.

Still, the concentration of both income and wealth at the top remained high, Fed economists said.

The top 10% of families held the same share of wealth in 2019—71%—as they did in 2016. The share of wealth held by the top 1% of Americans fell slightly between 2016 and 2019, from 33.9% to 33.1%. That share compares with 25% in 1989, when the survey started.

While the median net worth of white, non-Hispanic households rose 3% from 2016 to 2019, the wealth of Black households and Hispanic or Latino households increased at much faster paces: 33% and 65%, respectively.

White households’ median net worth amounted to $188,200 in 2019, more than seven times greater than median net worth for Black families at $24,100 and more than five times as large as the median Hispanic or Latino household’s wealth, at $36,200.

Write to Harriet Torry at [email protected]

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