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The rich borrow, too

Liability distribution across rich and poor households

Over the past  few  weeks, we’ve used data from a dataset compiled by the Federal Reserve Board specifically to analyze the distribution of data across households. While our target so far has been assets, today we look at liabilities. How do rich and poor households borrow?

The graph above shows the total liabilities of four wealth classes: the top 1%, the next 9%, the next 40%, and the bottom 50%. At first glance, it appears that richer households hold less in liabilities. But if you hover over the graph, you see the actual percentages: the top 1% hold 4.6% of all liabilities, the bottom half 36%. One might assume the rich borrow less and the poor borrow more. But to better understand this, let’s take a look at the major categories on the liability side of things.

The first category is mortgages, shown in the second graph. Poorer households are less likely to own a home, and when they do it is a smaller home. As they have less funds, they need proportionally larger mortgages to own those smaller homes. Richer households need smaller mortgages, but they have a fiscal incentive for larger mortgages, as mortgage interest is deductible from their taxes and their tax rates are likely higher. In the end, we see that the top 1% hold 4.2% of all mortgages, while the bottom half has 39%.

The second category is consumer credit, on shown in the bottom graph. This includes credit cards, student loans, car loans, and other similar liabilities. Here the bottom half amasses 54% of the total debt; quite obviously they borrow to make many purchases. But the top 1% also punch above their weight with 2.1% of total consumer credit. How come? One reason is that expensive but highly rewarding courses of study (medicine, law) contribute quite a bit to student debt. Also, the consumer credit numbers include credit card balances paid in full (about 30% of credit card debt, or 7% of all consumer credit).

How these graphs were created: The procedure is the same for each graph. You can find these series in the Distributional Financial Accounts or the Levels of Wealth by Wealth Percentile Groups release table; check the series you want, and click “Add to Graph.” From the “Edit Graph” menu, open the “Format” tab to choose graph type “Area” with stacking “Percent.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: WFRBLB50101, WFRBLB50102, WFRBLB50103, WFRBLN09047, WFRBLN09048, WFRBLN09049, WFRBLN40074, WFRBLN40075, WFRBLN40076, WFRBLT01020, WFRBLT01021, WFRBLT01022

It’s the great pumpkin FRED graph, Charlie Brown

Producer price index data for pumpkins and other treats

Happy Halloween from the FRED Team!

Economic data can be scary and full of tricks…but it also includes some treats, like this fun FRED series on the price of pumpkins. And we couldn’t help ourselves: We used FRED’s frighteningly awesome graphing tools to “seasonally adjust” this graph in all the right colors.

This data series, by the way, is a recent addition to FRED: goods-level producer price index (PPI) data used in the consumer price index (CPI). The graph obviously looks deserted in places. That is, data points are missing pretty much throughout the year, except in September and October. But if you think about it, that’s when pumpkins are MUCH more popular on the market, right? One simple observation is that the price of pumpkins has been remarkably stable for the past few years. Nothing scary here.

The second spooky graph, below, is all about inflation (price changes) for treats. Specifically, sugary sweets. The two CPI series in green and orange show how costs have increased for consumers; the PPI series in brown shows that costs have increased for producers, too; and the IP series in yellow shows how much production of sweets has changed. This (candy) bar graph reveals some sustained inflation for these goods, recently well above the 2% target the Fed sets for overall inflation. Depending on your sweet tooth, this might be a scary story after all.

How these graphs were created: For the first graph, simply search for “pumpkins,” select the series, and click “Add to Graph.” From the “Edit Graph” panel, use the “Format” tab to select graph type “Bar” and play with the color choices. For the second graph, search for and select one of the series; from the “Edit Graph” panel, use the “Add Line” tab to add the second series by searching for it in the search box. Repeat the search and selection process for the other two series. Now, select units “Percent change from year ago” and apply to all. And, once again, play with the colors in the “Format” tab to make it as spooky as possible.

Suggested by Yvetta Fortova, Keith Taylor, and Christian Zimmermann.

View on FRED, series used in this post: CUSR0000SEFR, CUUR0000SEFR02, IPG3113S, PCU31133113, WPU01130236

Who holds what wealth?

More from the Survey of Consumer Finances

A week ago, we reported on the evolution of wealth for different classes of households, divided by wealth quantiles: top 1%, next 9%, next 40%, and bottom 50%. This time we look at what their wealth consists of—again, leveraging the Federal Reserve Board’s Survey of Consumer Finances. The first graph shows the distribution of total assets across the four groups. As mentioned in the earlier post, the first three groups have a similar share of assets, despite having vastly different population sizes, with the bottom 50% having much less.

The second graph shows the same distribution, but this time restricted to real estate assets. Now it looks quite different, with the top 1% holding significantly less (as a share) while the bottom 50% are doing better.

The third graph shows that this is even more pronounced with consumer durables (cars and household appliances, for example). As with real estate, everybody needs some, and there is only so much that the richest can buy.

So where are the assets of the richest coming from? The next graph shows that they own a much larger proportion of financial assets, with the bottom half of the population owning almost none.

The picture is even more dramatic with non-corporate assets (mostly private ownership of non-public enterprises), where the top 1% own over 50%. You can explore more data from the release table, but the general picture is clear: The least wealthy mostly hold assets that are essential in some ways: housing and consumer durables. The wealthiest hold assets through financial vehicles or stakes in businesses.

How these graphs were created: The procedure is the same for each graph. Start from the Levels of Wealth by Wealth Percentile Groups release table, check the series you want, and click “Add to Graph.” From the Edit Graph” menu, open the “Format” tab to choose graph type “Area” with stacking “Percent.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: WFRBLB50081, WFRBLB50083, WFRBLB50084, WFRBLB50085, WFRBLB50098, WFRBLN09027, WFRBLN09029, WFRBLN09030, WFRBLN09031, WFRBLN09044, WFRBLN40054, WFRBLN40056, WFRBLN40057, WFRBLN40058, WFRBLN40071, WFRBLT01000, WFRBLT01002, WFRBLT01003, WFRBLT01004, WFRBLT01017

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