Pandemic Boosts American Household Wealth

American households experienced the largest surge in their wealth on record between 2019 and 2022, according to data released by the Federal Reserve. This increase was driven by rising stock prices, climbing home values, and multiple rounds of government stimulus. The data from the Fed’s Survey of Consumer Finances revealed a 37 percent jump in median net worth after adjusting for inflation, marking the biggest increase since 1989. Additionally, median family income rose by 3 percent between 2018 and 2021 when accounting for inflation.

While wealthier individuals experienced the most significant income gains, the data showed that Americans of all income levels made financial progress during this period. Savings increased, credit card balances decreased, and retirement accounts grew. This data, released every three years, provides an extensive snapshot of households’ financial circumstances, covering everything from savings to stock ownership across different demographic groups.

The release of this report marks the first time it has been published since the start of the coronavirus pandemic, offering insights into how families fared during this challenging economic period. Mass job losses occurred in early 2020, leading the government to implement relief packages to mitigate the impact. Recent trends, such as a booming job market with low unemployment and wage growth, have positively influenced incomes. However, rapid inflation has offset some of the income gains by increasing the cost of living.

When not accounting for inflation, median income would have risen by 20 percent based on the report. This financial progress, especially for lower-income families, is remarkable compared to the aftermath of the previous recession that lasted from 2007 to 2009. It took years for household wealth to fully recover after the recession, and for some families, recovery never happened.

While income increased across all income groups from 2019 to 2022, the highest income earners experienced the largest gains, resulting in widened income inequality. The average income rose by 15 percent, one of the largest increases over a three-year period. Wealth inequality was more nuanced, with the wealthiest families benefiting the most in dollar terms due to their larger share of financial assets. However, the survey revealed that the percentage increase in wealth was highest among lower-income families. For example, the net worth of families in the bottom quarter increased from $400 in 2019 to $3,500 in 2022. In contrast, the median net worth for families in the top 10 percent reached $3.79 million, up from $3.01 million three years earlier.

Determining the exact impact of pandemic-related payments on the data is challenging. The inclusion of one-time checks and other forms of assistance received during the pandemic could have influenced the measures of net worth. Additionally, some families were still receiving pandemic payments when the income data was collected in 2021, suggesting that enhanced unemployment insurance played a role.

The report highlighted another interesting trend: an increase in the number of first-time stock investors. The percentage of families owning stocks directly rose from 15 percent in 2019 to 21 percent in 2022, the largest change on record. Many of these new investors were likely smaller investors who participated in the market during the pandemic, reflecting the popularity of “meme stocks” like GameStop.

While the newly released Fed figures indicate progress, significant income and wealth disparities persist among different racial groups. However, Black and Hispanic families saw the largest percentage gains in net worth during the pandemic period. Median net worth for Black families increased by 60 percent to reach $44,900, while white families experienced a 31 percent increase, bringing their median net worth to $285,000. Hispanic families saw a 47 percent increase in net worth. Nevertheless, Black and Hispanic households experienced slower income gains compared to white families during the same period.

For the first time, the report includes data on Asian families, revealing they have the highest median net worth among all racial and ethnic groups.

While the data included in the report is slightly dated, it underscores the strong financial position of American families as they emerge from the pandemic. Robust net worth and increasing incomes have enabled continued consumer spending in 2023, supporting solid economic growth even as the Federal Reserve raises interest rates to manage it. This resilience has raised hopes that the Fed can achieve a “soft landing” by gradually slowing the economy without pushing it into a recession.