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Friday, March 31, 2023

Yes, the US economy may be slowing down, but do not forget it comes from the hottest year since 1984 – here’s who benefited from 4 cards

The US economy contracted unexpectedly in the first quarter, according to data on gross domestic product released on April 28, 2022. Although the reasons were technical and not seen as signs of weakness, it adds to concerns that the US may be heading for a recession other than the Federal Reserve seeking to fight inflation by raising interest rates.

But before we worry too much about what 2022 is going to bring, I believe, as a financial economist studying the decisions that people and companies make with money and the resulting impacts, it’s worth thinking about 2021, which is the strongest economic growth in nearly four decades. .

GDP, which provides a snapshot of the economy by measuring the total value of all goods and services produced and exchanged by consumers, rose by 5.7% in 2021 after taking inflation into account, the fastest pace since 1984.

So who has benefited from all this growth?

Record gains in US net worth

A useful way to determine how economic growth affects individuals is by looking at personal financial wealth. It is measured by net worth, or the difference between what someone owns and debt.

By that measure, it’s likely that the vast majority of Americans are better off than they were in 2020 – or even before the COVID – 19 pandemic – which means they have less debt relative to their assets. This is not a small part due to the trillions of dollars in pandemic-related spending by the US government.

Overall, Americans’ net worth increased by more than $ 18 trillion to $ 142 trillion by 2021, probably the largest increase ever.

That equates to an average profit of nearly $ 55,000 for every American.

The richest got the most out of it

Of course, the average hides tremendous variation between groups.

It has already been thoroughly reported that billionaires saw their wealth rise during the pandemic. This was largely driven by double-digit gains in the value of their shareholdings and businesses, while their liabilities grew by only 1%.

In 2021, the richest 1% of Americans saw their net worth grow from $ 6.7 trillion to about $ 46 trillion, accounting for more than a third of overall profits. Another $ 6.2 trillion went to the next 9%. Meanwhile, only $ 1.5 trillion went to the bottom 50%.

But those in the bottom half grew the fastest

The richest may have gotten the most, but the net wealth of the bottom half jumped at the fastest pace.

The bottom 50% have seen their wealth grow by 64% in 2021. This is the largest calendar year growth of any of these groups since at least 1988, dwarfing the percentage gains of the richest.

This has largely happened because homeowners have seen real estate assets grow much faster than mortgage debt.

While these changes are positive for Americans, both on average and in general, they have not changed the overall distribution of wealth as much.

The bottom half of Americans were responsible for 5.5% of the country’s assets before the pandemic and owned 5.9% at the end of 2021. Although it is the highest level since 2013, it still lags behind levels it saw during the 1990s, when the share rose to almost 9%.

White people have won the most, but still see share fall

Similar to the income-level story, most of the profits went to white Americans, who saw their net worth rise from $ 14.5 billion in 2021 to $ 119 billion. Black Americans earned $ 1.3 trillion, and Hispanics saw growth of $ 683 billion.

But the percentage gains were highest for people of color – 26% for African Americans and 24% for Hispanics. That compares with 14% for white Americans.

As a result, the overall share of white people dropped to 83.6%, the lowest since at least 1988 and most likely the lowest ever. Black net wealth increased to 4.4% of the pie, the most since 1992. Hispanics owned 2.5% of total U.S. net wealth.

For context, non-Hispanic white Americans make up about 60% of the population, compared to 13.4% for Black Americans and 18.5% for Hispanics or Latinos.

What happens next, as economic growth slows, is hard to say. A large portion of the coronavirus-related aid went to poorer Americans, who help explain the gains for the bottom 50% as well as for Black people and Latinos. That help is now over.

Yet the market for workers remains on fire, with unemployment at 3.6% at the end of March 2022, near a half-century low. And economists have predicted fairly solid growth.

Will this strong economic growth continue?

Count me as one economist who hopes that Americans will continue to benefit from improving job prospects to build prosperity – even if the economic picture gets a little more bleak.

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World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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