Pushed by a surging stock market, U.S. household wealth popped a 2.3 percent increase during the last three months of 2016, landing at a total of $92.8 trillion. The big bounce has some market watchers excited — the gains may predict a spending surge that will further lift the U.S. economy. Others are more circumspect, noting that gains are not widely shared enough.
Household wealth is comprised of household assets — including savings and checking accounts — and subtracts mortgages and other debt.
The big winners in the declining months of 2016 were Americans with stock and mutual fund portfolios — they increased by a whopping $728 billion in value in the October-December quarter, according to Federal Reserve figures released Thursday. Home values rose $557 billion.
Where the gains are tells you where the gains are most appreciated. The wealthiest 10 percent of Americans currently hold about 80 percent of the stock, so much of the gain went to that top ten percent. Homeowners did well — but since millennials as a generation are slower to the housing market than previous generations, older Americans have enjoyed more of the benefits of the real estate market turn-around that has been in effect since 2012.
Under more normal circumstances, Americans spend an extra 3-5 cents for every dollar of additional wealth they bring in; it is called the “wealth effect” by economists. However, concentrated wealth gains like the ones seen in the more recent cycle — especially in the more savings-prone older and richer demographics — may mean the economy-lifting bump one might expected to see from a nearly $2 trillion bump in household wealth in a mere three months may simply end up being kind of muted.
Moreover, it means the problem of income accumulation at the top continues to expand. According to the most recent data from economists Emmanuel Saez and Gabriel Zucman of the University of California-Berkeley, the wealthiest 1 percent held 42 percent of the nation’s wealth as of 2012. According to a research paper released by Saez, Zucman and Thomas Piketty, the richest 1 percent of Americans derive more than half their income from capital assets such as homes, stocks and bonds — as well as their share of pension savings. The bottom 90 percent of Americans derive less than 20 percent of their income from capital assets. Most of those assets are pension fund savings.
U.S. household wealth fell sharply in the Great Recession as the economy lost $11 trillion in asset values.
Net wealth got as low as $56 trillion in 2008.