Some Americans saw big gains in wealth during the pandemic. Here's why.
Many Americans saw major gains in their wealth during the pandemic, boosted by rising home and investment values as well as federal stimulus payments, according to a new report from the Federal Reserve.
The net worth of the median U.S. household — the midpoint between the richest and poorest households — surged 37% to $192,900 between 2019 and 2022, according to the Survey of Consumer Finances, published by the central bank on Wednesday. The survey, issued every three years, provides insights into the financial health of households by examining income, wealth and debt.
Millions of households saw their wealth jump during the pandemic thanks to gains in the value of their homes and investments. Even people who rent their homes, and thus were locked out of the dizzying rise in real estate values since 2019, saw a bump in median wealth.
The pandemic-induced recession, which was short and brutal, cost 20 million jobs, but the rapid recovery, fueled by relief such as stimulus checks and extra unemployment aid, helped bolster many households. Gains were widespread across ages, races and education levels, the Fed said.
"Increases in both median and mean net worth were near universal across different types of families, grouped by either economic or demographic characteristics," the bank said in its analysis of the data.
The boost to many families' wealth helps explain the robustness of the economy this year, despite a flurry of interest rate hikes from the Fed that have made it more expensive to buy everything from homes to cars. Economists had been warning that the rate hikes could push the U.S. into a recession, but so far that hasn't happened.
Many experts now think the U.S. is likely to avoid a recession. Goldman Sachs said in a research report on Tuesday that the consensus among experts is that the probability of a recession occurring during the next 12 months is now at 48%, down from 54% in July.
Government payments in the aftermath of the pandemic also boosted households' finances. The median value of checking and savings accounts and other cash holdings surged 30%, according to the Fed's survey.
And with borrowing rates historically low, Americans dedicated just 13.4% of their incomes to paying off debt in 2022, the lowest such proportion since the Fed survey began in 1989.
Wealthiest households thrive
Even so, substantial wealth inequality remained in place during the Fed's survey period, reflecting decades of widening disparities between the richest households and everyone else. Among the wealthiest 10% of households, median wealth reached nearly $3.8 million in 2022.
And disparities remain between some groups, with Black households' median wealth at about $45,000 in 2022, compared with $285,000 for the median White household. The racial group with the highest median wealth are Asian American households, with about $536,000 in assets.
The Fed found that even as wealth inequality declined during the pandemic, income disparities worsened. Median incomes grew 3% compared with the previous survey, which covered 2017 through 2019.
But average incomes, which are swollen by the earnings of the wealthiest one-tenth of households, jumped 15%. The outsize gain among the richest households was driven by profits on stock and property holdings as well as higher wages..
—With reporting by the Associated Press.