The first two years of the nation’s economic recovery have not been particularly even. As a matter of fact, just the opposite appears to be the case.
A Pew Research Center analysis of new data from the Census Bureau data says the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%. Households in the lower 93%, however, suffered a decline of 4%.
To put it in other terms, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244 from 2009 to 2011, while the 111 million households in the less affluent group saw their mean wealth fall to an estimated $133,817 from an estimated $139,896.
The fact that the stock and bond markets rallied during the 2009 to 2011 period while the housing market remained flat played a major role.
Affluent households typically have much of their assets in stocks and other financial holdings, while the wealth of less affluent households is typically concentrated in the value of their home.
From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth soar by an estimated $5.6 trillion. The 111 million households with a net worth at or below that level saw their aggregate wealth plunge by an estimated $0.6 trillion.
The gap widens
These differences resulted in an increase in wealth inequality during the first two years of the recovery. The upper 7% of households saw their aggregate share of the nation’s overall household wealth pie rise to 63% in 2011 from 56% in 2009. On an individual household basis, the mean wealth of households in this more affluent group was almost 24 times that of those in the less affluent group in 2011. At the start of the recovery in 2009, that ratio had been less than 18-to-1.
The overall wealth of America’s households rose by $5 trillion, or 14%, during this period. Household wealth is the sum of all assets, such as a home, car, real property, a 401(k), stocks and other financial holdings, minus the sum of all debts, such as a mortgage, car loan, credit card debt and student loans.
During the period under study, the S&P 500 rose by 34% (and has since risen by an additional 26%),. At the same time, the S&P/Case-Shiller home price index fell by 5%, continuing a steep slide that began with the crash of the housing market in 2006.
The different performance of financial asset and housing markets from 2009 to 2011 explains virtually all of the variances in the trajectories of wealth holdings among affluent and less affluent households during this period.
Among households with net worth of $500,000 or more, 65% of their wealth comes from financial holdings, such as stocks, bonds and 401(k) accounts, and 17% comes from their home. Among households with net worth of less than $500,000, just 33% of their wealth comes from financial assets and 50% comes from their home.
Getting it back
Overall, net worth per household in the U.S. in 2011 made up nearly all the ground it had lost since 2005 -- $338,950 versus $340,252 in 2005, the latest pre-recession data published by the Census Bureau.
Pew says total household wealth doubtless rose for a period after 2005 before falling precipitously during the Great Recession of 2007-2009 and rebounding since then. However, no household wealth data are available from the Census Bureau for the years between 2005 and 2009, so it is not possible to pinpoint when, or at what level, the peak in wealth per household occurred.