Federal Reserve Economic Data

The FRED Blog has discussed how the onset of the COVID-19 pandemic reduced the net worth of households. To recap: Your net worth is the difference between the value of your assets and the value of your liabilities. When the value of your assets decreases while the value of your liabilities stays constant, your net worth becomes smaller.

The ALFRED graph above shows that the largest reduction in household net worth during the first quarter of 2020 occurred for the wealthiest 1% of households. The high volatility of financial markets during that period and the differences in the distribution of total assets across different classes of households can help explain that.*

The same ALFRED graph also shows that, during the second quarter of 2020, household net worth increased all around, this time with the largest gains among the bottom 50% of households.

Given the large reduction in economic activity recorded during that time, this rebound is remarkable. Faster growth in home prices and the large accumulation of real estate assets among the least wealthy can help explain this gain in net worth. Also, much of the gains in asset values comes from expectations of higher future incomes, which may not correlate with current income nowadays.

*This post shows an ALFRED graph to display the data available at the time of writing. For the latest data, see this graph.

How this graph was created: From FRED’s main page, browse data by “Release.” Search for “Distributional Financial Accounts” and click on “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.” Use “Edit Line 1” to change the graph units by selecting “Units: Percent change” and clicking “Copy to All.” Last, edit the graph “Format” by selecting “Graph type: Bars” and choosing colors to taste.

Suggested by Diego Mendez-Carbajo.

Recessions take their toll in many ways, including on households’ net worth, a stock variable that measures the difference between the value of the assets and the value of the liabilities, or obligations, a person has accumulated over a lifetime. And, as you might expect, FRED has data on this topic.

We made some adjustments to the FRED graph shown here that could use a little explanation: We started with a graph of households separated into four different classes according to wealth. We changed the units of the asset data from millions of dollars to an index and then set the base period at the beginning of the Great Recession of 2007-2009.

Now we can compare how these four different classes of households (top 1% in wealth, next 9%, next 40%, and bottom 50%) fared after the largest and most protracted contraction in economic activity since 1981. (Not for nothing is that economic downturn called the Great Recession.) In the graph, the zero date represents the fourth quarter of 2007, when the Great Recession started. The dates numbered 1 to 40 represent the number of quarters after that initial date.

This downturn itself lasted six quarters, or two and a half years, from December 2007 to June 2009. And its impact on nominal household net worth was most marked for the bottom 50% wealth quantile: At the trough of the recession, the net worth of the lower half of households decreased anywhere from 23% up to 40%. Because the least wealthy mostly hold assets in the form of housing and consumer durables, the real estate market collapse associated with the Great Recession affected this group of households the most. Moreover, it took twice as long than for any other household group for their net worth to grow back to pre-recession levels.

Further Reading

• For more on this topic, read the Economic Synopses essays from William Gavin and Diego Mendez-Carbajo.
• For more on how the starts and ends of recessions are dated, check this FRED Blog post.
• Previous FRED Blog posts have also examined how U.S. GDP has recovered after five recessions (1937, 1981, 1990, 2001, and 2007). By the way, GDP is a flow variable (compared with a stock variable such as household net worth) because it measures the value of all new goods and services produced in a country during a single year.

How this graph was created: From FRED’s main page, browse data by “Release.” Search for “Distributional Financial Accounts” and click on “Levels of Wealth by Wealth Percentile Groups.” From the table, select the “Total Net Worth” series held by an individual wealth quantile and click on “Add to Graph.” To change the units of the series to a custom index with integer periods, see here.

Suggested by Diego Mendez-Carbajo.

Your net worth is the difference between the value of your assets and the value of your liabilities.

On average, changes in household net worth are driven by changes in the value of financial assets. And these types of assets differ across classes of household wealth: The least wealthy hold assets mostly in the form of housing and consumer durables, while the wealthiest hold assets through financial vehicles or stakes in businesses.

The FRED graph above shows how the onset of the current economic recession has affected each group differently. Each bar represents the quarter-to-quarter percent change in net worth by wealth quantile. Throughout 2019, net worth increased for all four wealth classes of households. During the first quarter of 2020, net worth decreased for all classes of households but was most marked for the wealthiest 1%. The high volatility of financial markets, which peaked in late March, likely explains this phenomenon.

How this graph was created: From FRED’s main page, browse data by “Release.” Search for “Distributional Financial Accounts” and click on “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.” Change the graph units by editing line 1, selecting “Units: Percent change” and clicking “Copy to All.” Last, edit the graph’s format by selecting “Graph type: Bars” and choosing colors to taste.

Suggested by Diego Mendez-Carbajo.