The FRED Blog has covered the changes in household net worth throughout 2020, describing how different household groups experience different changes in their balance between assets and liabilities during the COVID-19-induced recession:
- The uncertainty of the first few months of the pandemic shook financial markets and resulted in larger net worth losses for the top 1% of households by wealth. This group holds the largest volumes of financial instruments or stakes in businesses.
- By the second half of the year, the growth in home prices yielded larger gains to the bottom 50% of households by wealth. This group holds a larger proportion of their wealth in real estate assets.
Today’s question is, Whose assets have grown in value faster than their liabilities during 2020? That is, whose net worth has increased the most?
The FRED graph above shows that, since the end of 2019 until the time of this writing, the least-wealthy households have seen their net worth grow by as much as 30%. That is the fastest growth of all four household groups.
Because we’re talking about net worth and not income, translating this improved wealth position into increased current or future consumption isn’t necessarily straightforward. In fact, this much quoted study by Neil Bhutta and Lisa Dettling at the Board of Governors documents how, regardless of their wealth, many families hold very little cash in hand.
How this graph was created: From FRED’s main page, browse data by “Release.” Search for “Distributional Financial Accounts” and select “Levels of Wealth by Wealth Percentile Groups.” From the table, select the “Total Net Worth” series held by each of the four wealth quantiles and click “Add to Graph.” Next, change the units to “Index (Scale value to 100 for chosen date)” and enter “2019-04-01,” the quarter prior to the start of the COVID-19-induced recession. Click “Copy to all” and change the start date of the graph to 2019-12-01. To use the same graph style shown here, use the menus in the “Format” tab.
Suggested by Diego Mendez-Carbajo.