The Federal Reserve has good news for Hillary Clinton
Maybe America is great again, after all.
New data from the Federal Reserve shows that Americans’ net worth hit a new record high this year, suggesting the economy continues to improve, despite worrying signs. Total net worth of all U.S. households and nonprofit institutions (which is mostly households) hit $88.1 trillion in the first quarter, up $900 billion, or 1%, from the end of 2015.
A strengthening economy is likely to benefit Democratic presidential candidate Hillary Clinton, since good economic news tends to boost approval ratings of the incumbent president and other politicians of the same party. Many of Clinton’s economic policies are similar to those of President Obama, who can plausibly claim that the economy has improved during most of his tenure in the White House. Not by enough—but at least improved.
Total net worth took a huge hit during the recession, plunging from $67.7 trillion in 2007 to $54.6 trillion in 2009; in two years, in other words, Americans lost nearly 20% of their wealth. They regained it, on the whole, by 2012, and since then a modestly growing economy has pushed wealth higher.
There are two big components to household wealth: Financial assets and real estate. Financial assets recovered faster from the recession. By 2011, Americans had recovered all the financial wealth lost during the stock-market crash, with a big assist from aggressive Fed policy meant to reflate the value of stocks and other assets. Housing wealth took longer to recover, not hitting the prior peak until earlier this year.
This chart shows the trend since 2000:
There’s an important caveat the chart doesn’t capture. The Fed’s data doesn’t show how widely or narrowly America’s private wealth is shared. So the total amount of wealth could be higher but be concentrated more at the top of the income chain than before the recession. And ordinary families could feel worse off even as the country as a whole gets richer.
Other evidence shows that the nation’s wealth, while vast, is, in fact, concentrated among fewer Americans than it used to be. Housing wealth has hit a new record, for instance, at the same time the homeownership rate has dropped from 69% in 2006 to 63.5% today. If a smaller portion of Americans own homes, that means the wealth of home equity is being shared among fewer people.
Incomes have been depressed as well. After a big drop from 2009 to 2014, median household income, adjusted for inflation, is only now approaching pre-recession levels. And it’s still only roughly equivalent to what it was in 2000, which means the typical family has gotten precisely nowhere during the last 16 years, in terms of improving their quality of life. Flat incomes make it harder to save and accumulate wealth in the first place.
The stagnant sectors of the US economy explain why Donald Trump, the cantankerous Republican presidential nominee, has found surprising traction with his gloomy message of America in decline. From now through November, the biggest factor in the presidential election may be whether wealth continues to grow, trickling down to more Americans, or a slowdown reverses the gains of the last few years. Growing prosperity favors Clinton, while declining prosperity favors Trump. For now, Clinton has the edge–but it’s an awfully thin one.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.