Friday, March 11, 2016

The U.S. is richer than ever

Yesterday the Fed released its estimate of the balance sheet of U.S. households as of the end of last year. Collectively, our net worth reached a new high in nominal, real, and per capita terms. We can complain all day about the fact that we are living in the weakest recovery ever, and things could and should be a lot better, but it is still the case that today we are better off than ever before. (The stock market has recovered virtually all of its losses year to date, so the significance of the numbers you see here hasn't changed.)

As of Dec. 31, 2015, the net worth of U.S. households (including that of Non-Profit Organizations, which presumably exist for the benefit of all) reached a staggering $86.7 trillion. To put that in perspective, it's about one-third more than the value of all global equity markets, which were worth $64.6 trillion at the end of last year according to Bloomberg.

On a real, per capita basis, the net worth of the average person living in the U.S. reached a record $270,000. This measure of wealth has been rising, on average, about 2.4% per year since records were first kept beginning in 1951. There's nothing unusual going on: life in the U.S. has been getting better and better for generations. If you're hungry for more details of the steady march of progress, check out Human Progress, a worthwhile project of Cato, my favorite think-tank.

And even if it were the case that the entirety of the value of stocks, bonds, deposits and real estate included in these statistics were owned by a handful of people, we all enjoy their benefits. These assets are what provide jobs and the wherewithal to run and maintain our economy.

This ongoing accumulation of wealth is not a house of cards built on a bulging debt bubble either, regardless of what you might hear from the scaremongers. On the contrary, the typical household has undergone a significant deleveraging since the onset of the Great Recession in 2008. Household liabilities today are the same as they were in early 2008 (about $14.5 trillion), but financial assets have increased by one-third, thanks to significant gains in savings deposits, bonds, and equities. Since early 2008, the value of households' real estate holdings has increased by a relatively modest 8%.


The Smoky Mountain Hiker said...

Scott - there will be some that will say that these trends are being driven by the top 1% (in other words, they are the only ones getting wealthier) - is it possible to strip out their wealth figures, and publish the top 2 charts without that data?

Scott Grannis said...

Sorry, can't break these figures down as you suggest. But I've tried to address your point by saying it doesn't really matter who owns the assets, since we all benefit in many ways from their existence. Nevertheless, here's something to consider: The total wealth of the Forbes 400 last year was $2.34 trillion, and the poorest of the 400 wealthiest people in the U.S. was worth $1.7 billion, with the bottom 58 worth $2.0 billion or less each.

So last year, the top 400 wealthiest people controlled less than 3% of the net worth of all U.S. households. I'd wager that even if you looked at the 1000 wealthiest people, their combined net worth would be less than 5% of total wealth. As you add more people to the list, their individual net worth drops steadily, so even the top 1% would probably control less than 20% of total wealth. I note that in 2013, the top 1% of all income earners earned 19% of all income.

Benjamin Cole said...

Great post.

Randall Aamot said...

1% of the population is 3.2 million people. Non profits being included is a big factor. Churches and charities are used as tax havens.

Randall Aamot said...

1% of the population is 3.2 million people. Non profits being included is a big factor. Churches and charities are used as tax havens.

Scott Grannis said...

Nonprofit detail is only available through 2000, but the Fed does estimate that nonprofits today own about 13% of all real estate.

The entire reports is here:

Balance sheet tables are here:

AmericanFool said...

This is very cool info, so don't get me wrong when I launch into the very relevant comment about the skew being important... it's the 10% vs the next 50% vs the bottom 40%, roughly. The issue seems to be the gap between the 3 groups - wealth distribution, not societal wealth. I get your point about the value of societal wealth, but that's not what drove 'occupy Wall Street' and it's not what's driving Trump and Sanders. There is a real dislocation, and it is dangerous to overlook it, regardless of societal net wealth. The middle class has split in two, about half moving up and half moving down. The real issue seems to be that a lot of people that used to be part of the economy are no longer in demand (and as a reasonably educated person myself, it amazes me how insecure I feel.) I'm in the 10%, so I'm not pushing an agenda, but I have been keeping tabs... I just think there has been so much economic dislocation in such a short period of time that it's outpaced the ability of many of our citizens to keep up(a lot of engineering and tech firms seem to agree.) There is a significant undercurrent of anger out there, and these kind of metrics seem to provide further evidence that they are not being seen or heard. That's not a criticism, this is good information and great of you to put it out there; I just happen to believe there are trends underneath those charts that are important to comprehend.