Despite increasing their net worth by nearly $2 trillion in just three months, America’s households have still not regained the wealth they lost to the financial crisis and ensuing recession.
The Federal Reserve reported on Monday that total American household net worth increased by $1.9 trillion in the third quarter of the year, hitting a total of $77.3 trillion. As the Wall Street Journal notes, “Americans’ net worth is still roughly 1.4 percent below its peak” once inflation is factored in. Total household net worth peaked at the end of the first quarter of 2007 — just before the collapse wiped out about $17 trillion in household wealth — at roughly a trillion dollars above its latest level.
By contrast, bank profits have rebounded to record highs in less than five years. Many of the financial officials whose negligence or malfeasance contributed most directly to the crisis have walked away with not just their freedom but their personal fortunes intact. None of this has stopped financial executives from feeling aggrieved.
The partial recovery in household wealth is also misleading because that recovery has been so concentrated among the wealthy as to be imperceptible for most of the country. The top 1 percent of earners captured 121 percent of income gains in the first two years of the recovery — meaning that people at the bottom of the income distribution saw their earnings fall in that same period. Despite massive productivity gains in recent years, American workers have seen their wages fall since the recession. These facts contribute to a scary and ongoing reality: The middle class is disappearing at a time when America’s economy needs to be growing from the middle out in order to restore economic mobility for future generations.