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Net worth gains in 2020 were the largest for the least wealthy

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:

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.

Geographic variation in house price growth

Pre-pandemic vs. post-pandemic data maps

The COVID-19 pandemic has been fueling a major boom in the U.S. housing market, and prices have risen at a rate not seen since the mid-2000s. The year-over-year percent increase in the S&P/Case-Shiller National Home Price Index hit 14.58% in April, its highest value in the history of the series. In this post, we’ll look at how this surge in house prices is playing out across individual U.S. states.

The first GeoFRED map shows post-pandemic house price growth in each state in January 2021, and the second map shows pre-pandemic growth in January 2020. This measure of growth in house prices is the percent increase in the median listing price per square foot compared with a year ago. Both maps are included to get a quick sense of which states saw recent house prices increases that were demonstrably higher than their “usual,” pre-pandemic levels.

The presence of darker colors throughout the 2021 map reflects much higher post-COVID house price growth overall—in fact, in nearly all states. The national median values were 4% in January 2020 and 17% in January 2021. However, some areas had particularly dramatic increases, notably on the coasts and in some of the mountain states. For example, California saw a 3.5% increase in its median listing price between January 2019 and January 2020, but an almost 50% increase between January 2020 and January 2021.

The difference for the Midwest, on the other hand, is not as stark. But there are some exceptions: Tennessee, Michigan, and Minnesota saw notable changes from their pre-pandemic values.

Why have house prices risen more in some places than others? Home prices historically rise more in the expensive cities on the east and west coasts, with their more constrained supply. Many people anticipate working in the office less often, so increased demand for housing in the suburbs interacts with these areas’ low supply (and ability to build additional housing), which drives up prices more in these already high-priced regions.

Interstate relocation plays a role as well. The potential for remote work has workers seeking housing in historically low-priced markets that previously did not have major job hubs as the coasts do, resulting in price increases elsewhere.

How these maps were created: The original post referenced a interactive maps from our now discontinued GeoFRED site. The revised post provides replacement maps from FRED’s new mapping tool. To create FRED maps, go to the data series page in question and look for the green “VIEW MAP” button at the top right of the graph. See this post for instructions to edit a FRED map. Only series with a green map button can be mapped.

Suggested by Victoria Gregory and Joel Steinberg.

Has the pandemic boosted labor productivity?

Output fell, hours worked fell more, so labor productivity is up

In a previous post, the FRED Blog disentangled the general concept of growth in output from growth in hours worked and growth in labor productivity. The key takeaway: Labor productivity growth allows workers to produce more goods and services during each hour of work.

The FRED graph above shows the amount of U.S. real output (in green), the overall number of hours worked (in red), and labor productivity (in blue). These quarterly indexes produced by the U.S. Bureau of Labor Statistics to measure each concept have been re-indexed to the first quarter of 2020, the start of the COVID-19-induced recession. The dashed line represents the value (100) for each of these concepts at that point in time.

Again, labor productivity is output per hour worked. For most of 2020,  overall output declined but overall hours worked declined even more. Because the reduction in hours worked was larger than the reduction in overall economic activity, labor productivity increased.

Historically, this is unusual. In all but 3 of the previous 11 recessions (1948-49, 1969-70, and 2001), the number of worked hours decreased less than real output did. As a result, labor productivity decreased for those 8 recessions.

As of the first quarter of 2021, inflation-adjusted output is above pre-recession levels and the number of hours worked remains depressed. When recessions end, overall economic activity tends to grow faster than employment and so labor productivity tends to get a boost. Will that end up being the case this time around? Keep up with the FRED Blog and we’ll figure it out with FRED® data.

How the graph was created: Search FRED for “Nonfarm Business Sector: Real Output Per Hour of All Persons.” From the “Edit Graph” panel, search for and add two more series: “Nonfarm Business Sector: Hours of All Persons” and “Nonfarm Business Sector: Real Output.” Next, change the units to “Index (Scale value to 100 for chosen date)” and from the U.S. recession menu select “2020-02-01,” the start date of the COVID-19-induced recession. Click on “Copy to all” and change the start date of the graph to 2019-12-01. Last, use the “Add Line” tab to create a user-defined line. Create a line with start and end values of 100. To use the same graph style shown here, use the menus in the “Format” tab.

Suggested by Diego Mendez-Carbajo.

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