Household net worth soared to a record high at the end of 2020, and better yet, almost everyone shared in the wealth, according to new research.
Despite a pandemic year that closed businesses and put millions of people out of work, household net worth ended the fourth quarter of 2020 at an all-time high of $130.2 trillion, the Federal Reserve said on Thursday in its quarterly Flow of Funds report. That’s up 10.1% from 2019 and up 5.6% from the prior quarter.
Much of that is attributed to rises in real estate and equity prices to record highs amid ongoing loose monetary policy, unprecedented federal stimulus, and the limitations imposed by the pandemic on discretionary spending. While all this is good news, the even better news is that people across all income levels appear to have made gains.
According to an ING international survey, U.S. savings rates increased across 11 of 14 income levels measured, with respondents in four of the five lowest income groups reporting saving more.
“We suspect that the way the U.S. government reacted to the crisis has broadened out the range of households who have seen an improvement in their financial position,” ING Chief International Economist James Knightley wrote in a research report. “While not necessarily making a huge dent in the wealth inequality within the US, there is evidence of a tangible increase in net financial worth spread over more of the income spectrum.”
He said the government’s decision to subsidize the labor market via unemployment supplements and extensions, coupled with the current reopening of the economy, has substantially boosted incomes of poorer households compared with pre-pandemic levels. This statement is supported by University of Chicago research that indicates lower-wage workers eligible for regular unemployment compensation actually netted more from benefits than they did pre-pandemic.
“This should cement the US’ position as the fastest growing developed market economy and potentially allow it [to] even grow as fast as China this year,” Knightley said.
ING forecasts 6.5% U.S. GDP growth this year.