Jeremy Horpedahl in The City Journal: The Federal Reserve’s latest Survey of Consumer Finances contains several revelations about the state of the American economy.
First, it found that the average American household’s net worth is over $1 million. Outliers can distort averages, of course, but even median household wealth is at the Fed’s highest level ever recorded. In 2019, it was still stuck below pre-Great Recession levels. By 2022, however, it had reached $192,000, eclipsing the 2007 mark by more than 10 percent, and almost doubling the post-Great Recession 2010 figure. (These and all subsequent data are adjusted for inflation.)
Income data complicate this rosy picture. The Census Bureau found that median household income has declined by almost 5 percent since 2019. That raises a question: How can median household wealth be up by 37 percent since 2019 at the same time median household income declined?
Inflation over the past two years has cut household wage growth compared with pre-pandemic levels and made it harder for many families to put money into savings. Still, wealth has grown robustly in that span because the assets that Americans already owned in 2019 have dramatically increased in value.
For many households, their largest asset is their home. Median home-sale prices soared more than $130,000 between 2019 and 2022, which may not have made you feel wealthier—if you were shopping for a home, you may have felt poorer—but it boosted household balance sheets. Those benefits extended across the income distribution, too, since a slight majority of households in the bottom half of the income distribution own their home.
Home prices weren’t the only thing driving household-wealth growth. Despite its recent volatility, the S&P 500’s 2022 average was 37 percent higher than it was in 2019, meaning household retirement accounts were a lot fatter in 2022, too.
The Fed’s triennial survey also includes subgroup-specific data, which can shed light on some contentious political debates.
Let’s start with generational wealth. We often hear that millennials have it worse than their predecessors. Using the survey data, we can evaluate that claim.
In 2022, when the survey was released, Millennials were aged 26 to 41. To compare results across generations, take the respective years when Generation X (2006) and the Baby Boomers (1990) were also aged 26 to 41. Since the Fed’s survey is released every three years, 2007 and 1989 are the best comparison years for current millennials with older generations.
Because the Fed data don’t break out neatly by generation, we have to rely on its given age cohorts. The closest cohort in the Fed’s data is that aged 35 to 44 (which includes a few years of Gen X but is mostly millennials). This cohort’s median wealth was $135,000 in 2022, similar to the 2007 ($126,000) and 1989 ($130,000) figures.
More here.
