During Covid-19, most Americans became richer — especially rich

The· Coronavirus pandemic The Americans were in recession. Instead of appearing poor, many came out first.

According to the Federal Reserve Board, US households added $ 13.5 trillion in wealth last year. This is the largest increase in records 30 years ago.Many Americans on all stripes Repay credit card debt, Saved more and refinanced to a cheaper mortgage. It challenged previous recessionary practices. For example, in 2008, US households lost $ 8 trillion.

In a sense, the peculiarities of the Covid-19 recession, and the recovery, are not surprising. The range of pandemics was unprecedented in modern times.

it was Government financial response.. The United States has borrowed, lent, and spent trillions of dollars to prevent the economy from plunging further.

These actions were at the heart of the anomalous nature of both recession and recovery. They have also empowered many of the unexpected booms in the stock market. Solid interest rates have attracted more investors to stocks.Worker stuck at home I tried to make a deal And tech giant Acquired more ground Shutting down.

The stock market, in turn, was the driving force behind the increase in household wealth, accounting for almost half of the total increase.

Wealth households are more likely to own stocks, which has created a biased distribution of wealth profits. Over 70% of household wealth growth went to the top 20% of income earners. About one-third was in the top 1%.

Profit was even more concentrated when Americans were grouped by wealth rather than income. (Wealth is calculated by subtracting household debt, such as mortgages and university debt, from assets, such as housing and stock market investments).

Stay-at-home order Free fall the economy At the beginning of the pandemic, but the shock turned out to be short.

Americans doing high-paying jobs Especially successful..Many white-collar employees were able to work from home, and they Save money by not commuting or eating out.. Checking government stimulus and expanding unemployment allowances have brought restaurant servers and house cleaners to the dismissed low-wage service jobs.

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Many low-income workers came out first. For example, according to the JPMorgan Chase Institute, by October 2020, the balance of checking accounts in the bottom 25% of income earners had increased by about 50% year-on-year. However, much of their wealth growth came in the form of stimulus checks and unemployment allowances that would decline as the economy recovered.

And many low-paying jobs are still gone. As of April 2021, jobs above $ 60,000 increased by about 2% compared to January 2020 levels, according to Opportunity Insights, a research group based at Harvard University. Jobs under $ 27,000 fell by nearly 24%.

The Americans who won the most in 2020 were those who had far more wealth in the first place. The value of homes, stocks and retirement accounts that are likely to be owned by wealthy people has skyrocketed, and these rises are likely to continue.

Economists didn’t initially expect things to work this way.For example, if a pandemic occurs First hit the US, stocks soared..

Then the Fed Reduced interest rates to almost zeroLaunched an array of Emergency loan program Started on a large scale Purchasing government debt.. Investors were no longer afraid of the credit market freezing and were piled up in stocks. A handful of tech giants benefiting from a stay-at-home order, Carried the entire market higher.

Later this year, the S & P 500 set a new record of 33 times. Rising stock prices accounted for nearly 44% of overall household wealth growth in 2020.

Instead, house prices, which tend to fall during the recession, have skyrocketed. Housing was already in short supply, but the pandemic increased demand and made the shortage even more serious.

The average selling price of existing homes exceeded $ 300,000 for the first time last year and continues to rise. Over $ 350,000 in May..Higher prices and lower interest rates are a boon to homeowners, many of them Pocket cash from their home Or saved money by refinancing to a lower interest rate.

Soaring prices Pushed home ownership out of reach For many low-income families and first-time buyers. Economists expect inflation to slow in 2021, but do not expect house prices to fall.

Meanwhile, the aid that helped Americans survive the last 15 months began to fade.The state has begun Reduction of unemployment allowance.. Three months have passed since the last stimulation check. Measures to allow borrowers to defer payments for mortgages and student loans will expire.

Those who missed the creation of wealth during the pandemic are not ready to survive the next big burden on their finances. According to the Federal Reserve Board, more than one-third of adults may not be able to cover the sudden $ 400 cost in cash by 2020.

Stimulation checking and enhanced benefits helped floating restaurant servers and other service workers continue to suffer from Covid-19 shutdowns.


John Turmatsuki / Boston Globe / Getty Images

Write to Orla McCaffrey at And with Shane fret

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During Covid-19, most Americans became richer — especially rich

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