Nearly all American families saw substantial gains in wealth from 2013 to 2016, according to new data released Wednesday from the Federal Reserve, a sign the recovery is picking up.
African-Americans and Hispanic families and people without college degrees had the fastest rise in wealth, a sign that the economic gains are finally spreading to all Americans. Economists say it’s an encouraging sign that the economic gains are finally spreading to all Americans. It’s a marked shift from the period between 2010 and 2013, when wealth feel for all racial and ethnic groups except whites.
“We’re glad the recovery is spreading to a lot of households,” Fed economists said Wednesday. The Fed does its Survey of Consumer Finances every three years, surveying over 6,200 households about their pay, debt, home ownership, stock holdings and other financial assets. It’s considered one of the deepest dives into the total net worth of American families.
Almost every slice of America — from young to old and rich to poor — saw their incomes grow and the value of stocks, homes and other assets climb. But the Fed was also quick to point out that inequality is growing between the mega rich and everyone else, and between whites and non-whites. The share of America’s income held by the top 1 percent of households reached 24 percent in 2016, a record high.
The economists didn’t elaborate on what caused the widespread gains, but they did note that the unemployment rate has fallen substantially in recent years from 7.5 percent to 5 percent last year.
The median net worth of white households was $171,000, nearly 10 times larger than for black households. The median net worth of African-American and Latino families was below $21,000. While minority families have seen the biggest percentage gains in recent years, they were starting from a much lower point.
The same was true of Americans without high school diplomas. Their median net worth was just $23,000. That’s the sum of the home, their savings, the stock holdings and other assets.
Median net worth jumped to $67,000 and soared to almost $300,000 for people with college degrees. The wealthiest and best educated families continued to pull away from everyone else.
“Shares of income and wealth held by affluent families have reached historically high levels,” wrote the Fed in its report.
The report showed growing income inequality over the last three decades. In 1989, the top 1 percent only held 17 percent of the nation’s income. The bull market on Wall Street and surging prices for mansions around the world helped the super rich accumulate more wealth.
As the mega wealthy have seen their share of the total pie climb, the bottom 90 percent have lost ground. Last year, the bottom 90 percent took home less than half of America’s total income for the first time since the Fed began calculating this statistic in the 1980s. In 1992, the bottom 90 percent captured over 60 percent of the income. It’s been a steady decline since.
Economists said the large financial gains made by blacks and Hispanics were largely explained by the fact that the two groups have far less money to begin with, compared to whites, and so any increase as a result of the nation’s economic recovery would appear to be disproportionately large.
“You’re looking at people with lower net worth, so when the economy recovers you are going to see them benefit disproportionately as a percentage,” said Jeffrey Eisenach, an economist and managing director at NERA Economic Consulting, which released a study in December on Latino prosperity.
“If you’re poor and you go through a tough period, you use all your savings to get through it,” Eisenach said. “If you go from having very little to doubling that, you still may not have very much but you see a big percentage gain.”
Given the persistent wealth gap between white families and minorities, Eisenach said he was optimistic that the gains are a “big sign of hope” towards slowly narrowing the chasm.
He expected to see the trend continue because his study showed that Latinos were disproportionately entrepreneurial, have high rates of workforce participation and have a propensity towards saving.
They are also a young demographic group compared to whites, he said; young Latinos are working whereas older whites may not be making as much as they used to.
“What you have is a hardworking entrepreneurial group which is getting ahead in America,” Eisenach said.