Wealth inequality is a deeply complex issue as it depends on the performance of financial assets such as stocks, bonds, and real estate. During the period of the survey, wealth increased to a greater extent in dollar terms for affluent families. However, in terms of percentage growth, lower-income families experienced the most substantial increase in net worth. Those in the bottom quartile saw their net worth rise from $400 in 2019 to $3,500 in 2022. In contrast, median net worth for the top 10 per cent of families climbed from $3.01 million to $3.79 million during the same period.
While the Fed’s data does not provide an exact breakdown of the impact of pandemic-related payments, it is clear that the financial relief provided during the pandemic played a role in these figures. Families who saved one-time checks and other forms of assistance received during the pandemic had these amounts included in their net worth calculations. Enhanced unemployment insurance and other benefits provided during the pandemic were also likely contributors.
One notable development stemming from this improved financial standing is the growing number of Americans entering the stock market. The data indicates that 21 per cent of families owned stocks directly in 2022, up from 15 per cent in 2019, marking the most substantial change on record. Many of these new stockholders were likely smaller investors, reflecting a growing interest in stocks, potentially driven by phenomena like the “meme stock” trend exemplified by GameStop during the pandemic.
The data in the Fed’s report demonstrates that despite the persistence of income and wealth disparities across racial and ethnic groups, Black and Hispanic families experienced the most significant percentage gains in net worth during the pandemic period. Notably, Black families saw a 60 percent increase in median net worth, while Hispanic families witnessed a 47 percent increase, compared to a 31 percent increase for white families. The report introduced data on Asian families for the first time, revealing the highest median net worth among all racial or ethnic groups.
This data, though slightly dated, underscores the robust financial position of American families as they emerged from the pandemic. Strong net worth and increasing incomes have enabled continued consumer spending into 2023, thereby supporting a robust economy even as the Federal Reserve raises interest rates to manage economic growth. This resilience has raised hopes that the Fed may successfully engineer a “soft landing,” a scenario where it gently slows the economy without plunging the nation into recession.