The shadow behind rising household net worth
Data on the economy this week has been overwhelmingly positive. Retail sales were up in May, which means people are shopping more; consumer sentiment is also up, which means people are more likely to shop more in the future; producer prices recorded their biggest increase in two-and-a-half years, which, coming on top of rising consumer prices last month, is a sign that we’re seeing hints of possible inflation – which is a good thing, in moderation. And the last number that analysts cheered this week: household net worth, which rose to $84.9 trillion.
Sounds great, except there’s one big problem, especially with that net worth figure. It’s a measure of the growth in the value of assets – homes, securities and such – owned by Americans. It’s a sign that the housing market and the stock market going up in value. That’s good news – if you own shares or a house. The problem is that a large – and growing – chunk of the population owns neither.
63.5 percent of households are homeowners, which means 36.5% are not. Meanwhile just 52 percent of American adults say they or their spouse own any stocks. That means that while we’ve seen some great gains in the stock market lately (and some moderate gains in some housing markets), nearly half of the population of the country sees no direct benefit from those increases.
And that’s one of the main reasons why this economy is still shaky, because while half of Americans feel wealthier as the markets improve, between a third and a half of the country does not. Instead, they feel increasingly disenfranchised and marginalized. It’s not that they don’t want to be part of the middle class – or the ownership society, as George W Bush put it, it’s because they simply can’t get there. Programs designed to give Americans a leg up into the middle class have been cut back or killed, and corporations, who, we were told, would create jobs if they got more money and more freedom, have not risen to the challenge. They have failed to create the kinds of jobs that pay well enough to let workers buy assets, or even save. The result is that a big chunk of the American public is denied social advancement, confirming America’s place close to the bottom of the social mobility list.
This may not sound like such a big deal: if two-thirds of the population own assets and are therefore getting wealthier and probably spending more, then the economy should be OK, right? Wrong. The US economy is overwhelmingly dependent on consumer spending, which means we need every household in America able to participate actively in the consumer economy. That won’t happen until all Americans feel wealthier. And that won’t happen until as many people as possible own a piece of the pie.