A troubling report on family net worth from the Federal Reserve

money bags

Look who’s happy.

The Wall Street Journal headline today seems like great news: ‘U.S. Household Net Worth Hits Record High.‘ It is good news for those sharing in the prosperity. But the article’s sub-headline sheds light on the complexity: ‘Surging Stock Market and Rising Home Values Deliver Benefits, Especially for Affluent.

The Federal Reserve issued a report Thursday noting that the net worth of U.S. households  rose 14% last year, to $80.7 trillion, the highest on record. Even adjusted for inflation, U.S. household net worth – the value of homes, stocks and other assets minus debts and other liabilities – hit a record.

Great news, right? Here’s the dark side, from the Journal report:

But the rebound, while powerful, has been tilted in a way that limits the upside for the broader U.S. economy and is increasingly leaving behind many middle- and lower-income Americans.

“Wealth inequality…has increased over time,” said William Emmons, an economist at the Federal Reserve Bank of St. Louis. “So, there seems to be a disconnect: There are big wealth gains, but not much follow-through on consumer spending.” …

Younger families in particular continue to lag behind in the wealth recovery. The average young family—led by someone under 40—has recovered only about a third of the wealth it lost during the crisis and recession ….  By contrast, the average wealth of middle-aged and older families has recovered to roughly precrisis levels.

I write a blog about Treasury Inflation-Protected Securities and I Bonds, two investments that focus on capital preservation, and therefore are targeted at upper middle-class and wealthy investors. You won’t get rich investing in TIPS and I Bonds, but a lot of rich people invest in them. Why? Because they are already rich.

I won’t admit to being rich (nobody does, right?) but I do know that what wealth I have came because I had the good fortune to be born in 1953, at a time of great economic expansion in the United States. I was able to finish college without debt. I was able to get a good job, right away. My wife and I were able to save money during the greatest bull market in U.S. history.  We were able to buy an affordable house and watch its value climb. We were able to accumulate enough assets to be more conservatively invested during the dual market crashes of the 2000s.

Yes, we saved diligently, but mostly … we were lucky.

Young families – people younger than 40 – face a much different picture today.  Many are burdened with heavy college debt. Many have had trouble finding jobs matching their skills. Their jobs no longer offer pensions, and their pay raises barely match inflation. They pay more for health care. Their investments have been hit by at least one major market crash, maybe two.

These families don’t have large stock market assets – how could they? – and many don’t own homes. So their net worth is not rising along with older Americans’. They can’t join the party.

The Federal Reserve of St. Louis took a look at these numbers and wrote a report titled,  ‘Housing Crash Continues to Overshadow Young Families’ Balance Sheets.‘  It includes this chart showing how younger families are not gaining ground:

Net WorthThe Federal Reserve study noted:

The main reason young families’ balance-sheet recovery lags is the recent housing crash and its lingering effects. The homeownership rate among younger families has plunged. … The house-price gains that have helped mainly older families to rebuild homeowners’ equity have been overshadowed among younger families by the ongoing retreat from homeownership.

This ‘two Americas’ theme isn’t new, but it is interesting to see it framed as young vs. old. As these young families age, will they be able to accumulate assets to build significant net worth?

I worry about that.


About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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11 Responses to A troubling report on family net worth from the Federal Reserve

  1. Ed says:

    Look at all the big lies (deceptions by omission) that are ongoing:
    The Public Be Suckered
    The chances are that intergenerational $ transfers are very large. Further, I will suppose that younger people (less power, less time to have become informed) are much more hurt.
    This status quo is a disgrace.

  2. tipswatch says:

    Actually, I think there really isn’t a war between the generations, I don’t sense that. But could there be? Possibly, at a time in the future when younger-than-baby-boomer folks will be asked to pay for the health care and retirements of baby boomers. We are NOT at that point today. But that still doesn’t remove the fact that younger people today face a possibly bleaker future than their parents. The solution is to figure out the way to a brighter future. Hope it happens.

  3. Jimbo says:

    The whole intergenerational theft concept is just an attempt to pit the young against the old. Its a diversionary tactic to prevent discussion of the true roots of income inequality. If everybody want’s to get back to the good old days of the 50’s and the 60’s, why not just return the tax rates on capital gains, corporations and rich individuals back to what they were in the US economy’s glory days? The reason is because corporations run the government. That’s why its going to take something like Occupy Wall Street to scare the politicians into doing the right thing. Over 50 years ago, my grandfather told me that “the banks run this country”. At the time, I thought that was an awfully cynical take on things. But then, he had lived thru the Great Depression. It took the Great Recession for me to realize that he was right!

  4. tipswatch says:

    Socrates, well done, but I am still going to disagree. While I was in college, the U.S. went through a very bad recession (1973-74) but by the time I graduated a few years later, the economy was improving, and jobs were plentiful. This period of woe also set up the great bull market of 1982-1999, my prime earning/investing years. HIgh mortgage rates didn’t affect me directly, but by the time I bought a house I paid 8%, which I thought was very good. I refinanced that down to 5% and eventually paid it off.

    The years of high inflation and Whip Inflation Now were matched by high wage increases. I got a job at a newspaper in 1979 and the week I started I got a 10% pay increase. Who knows why, it just happened.

    Yes, there are incredible technological advances today, and that can lead to a company like Whatsapp – with 450 employees – getting bought out for $19 billion. That’s great for 450 people and a few venture capitalists.

    There’s no doubt that working hard and excelling can lead to great careers today. But those careers are often paid low-ball salaries and close-to-inflation pay raises. And they company says, ‘You’re lucky to have a job.’

    I am not angry. I am just saying what I see today. For the great majority of young people, it will be hard to build wealth, unless we see another economic boom. I hope we do.

  5. Socrates If you Please says:


    it’s not the economy that’s vital and growing and like magic produces wealth for people. You’ve got the cause and effect backwards. The economy is simply the summation of the productive activities of the individuals which comprise it. “The people” need to get off their rear ends, stop whining and complaining, start hustling, and GET TO WORK. It’s rarely handed to anyone and I’ll wager it wasn’t really handed to you, either. You’d of graduated college/undergrad right around the oil crisis, ultra high inflation, stagflation, the Carter years. I’m not quite as old as you–not that you’re “old” LOL–but I remember those years pretty well. “WIN” = whip inflation now, by Gerald R. Ford. Remember? Remember odd and even days at the gas pumps? The gas lines? Wage and price controls? Death of equities?

    The economy didn’t magically spring to life in the 1980’s. Volcker crushed inflation, we had a pretty serious recession in the early 1980’s. So it wasn’t luck or magic, it was WORK ETHIC.

    Right now, we are living in an amazing age of wonderful technology. It is possible for an individual to be so much more incredibly productive than in the “good old days” of stagflation and oil embargos and punch card, room sized computers that if you were lucky you could get 20 minutes of time sharing at the university computer center at 3 a.m. to do your thesis. Using FORTRAN.

    Please don’t romanticize the past. They weren’t any more the glory days or the golden days than we are living in right now. You got what you have not because you were “lucky” but because you and your spouse worked for it. You educated yourselves, you got a job, you worked that job, and you saved. You didn’t have three divorces (did you?) and fourteen out of wedlock children with various baby mamas.

    I like your blog a lot but maybe because you’re getting a bit older you view the present through a haze of less than total hopefulness and optimism. I too have turned into a crabby curmudgeon somewhat but that doesn’t mean it’s the reality.

    There’s tons of wealth in this society and it’s there for the taking. But it does have to be taken, or rather earned, and any one who expects it to be handed to them on a silver platter has unrealistic expectations.

  6. tipswatch says:

    Jimbo, I was in the streets back then, too. We don’t want the theory of ‘inter-generational theft’ to cause marching in the streets, we really don’t. I hope it won’t come to that. We need an economy that is vital and growing and producing wealth for all generations, and where everyone who ‘tries’ has a chance to benefit. Right now, it’s not happening.

  7. Jimbo says:

    Intergenerational theft? Give me a break. If you don’t like what’s going-on become politically active and change things. Back in the 60’s, there was a little thing called the Vietnam War that I wasn’t particularly pleased with. So, we took to the streets and actually stopped the damned thing. It was the singular achievement of the Baby Boomers. Not too shabby.

    I’ll give the Occupy Wallstreet crowd credit for at least trying. Sitting on the sidelines accomplishes absolutely nothing.


  8. Mel says:

    Well given that the total stock market index, adjusted for inflation, finally surpassed its high of February 2000 last month I can’t say I’m surprised. What I find annoying is that practically no one questions the “new highs” the media constantly blabs for the market. Otherwise, of course those with surplus wealth are the ones in stocks and presumably large homes that appreciate as well.

    Too bad those left behind don’t emulate our host, or me, and cut back on making Hollywood stars, professional athletes, car dealers and vacation venues rich. Saving money isn’t much fun I realize but you can’t invest what you don’t have. On the other hand I am rich- I have more money than I need. Mel

    • Ed says:

      My firm figuring is
      (1) the ‘establishment’ are conpersons first, and in particular
      (2) the mainstream news media are self-serving scum.

  9. Andy says:

    Emmons was a professor of mine in college. Smart guy. Read your blog regularly as I use TIPs to fill much of the bond portion of my portfolio. I fit the bill of a younger family under 40, and it is immensely refreshing to hear a baby boomer admit to being lucky. Far too many BBs do not appreciate how their lives were helped along by the perfect confluence of macro factors. Somebody wrote an Op-Ed in the WSJ few months ago regarding the great intergenerational theft taking place right now. Think society as a whole needs to take a closer look at that concept and “invest” for the long term by treating the young as favorably as we do the old. Thanks for posting.

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