Bottom 50% of Americans Building Wealth Despite Inflation

Aug 31, 2022Financial Literacy, News

Recent economic data filtered through the Realtime Inequality tracker revealed that the bottom 50 percent of U.S. households, mostly those who had a net worth of $166,000 or less before the pandemic, are in their strongest relative financial position in a generation, despite rising inflation. Those households’ inflation-adjusted wealth grew by 2.8 percent in the first six months of the year.

“The remarkable trend observed since the beginning of the COVID recovery—sustained growth for the working class, breaking with decades of income stagnation—is continuing,” Gabriel Zucman, an economist who developed Realtime Inequality, wrote in an email to American Banker. “Although the overall economy is slowing down, it is still delivering large, inflation-adjusted gains for the working class.”

In the first six months of the year, incomes in the bottom 50 percent increased by 1.3 percent, while incomes in the middle 40 percent fell by 0.2 percent. However, the bottom 50 percent of Americans only account for 1.2 percent of the country’s wealth, while the top 1 percent make up 35 percent of the nation’s wealth.

Americans have still struggled this year, as many have turned to credit cards to maintain their spending, adding $46 billion in balances in the second quarter. Additionally, the middle class has been hit by a slowdown in real estate.

Moody’s Analytics chief economist Mark Zandi predicted home prices would fall 5 percent in the next year, or 10 percent if the nation falls into a recession, making wage gains an imperative part of a household’s wealth growth.

“The people in the bottom half and low-wage workers saw the most gains—the ones that have switched jobs in the lower end of the market have gained even more,” said Federal Reserve economist John Robertson.

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