In the U.S., a recovery for the rich

The financial crisis affected all Americans, but when the economy grew again, relief came unevenly

Officially, the Great Recession in the United States ended in June 2009. For the following 2½ years, though, the recovery has only blessed the rich. For the rest of America, it felt like the recession kept on going.

That’s according to research based on the latest available data on the wealth of U.S. households. At the height of the financial crisis, the economy spared few American families, rich or poor. But once it started growing again, relief came unevenly. Only households in the top seven per cent of the income ladder saw their net worth—assets minus debt—grow between the second half of 2009 and the end of 2011, the recent Pew Research Center analysis shows. For the bottom 93 per cent, wealth continued to decline, shrinking by four per cent—more worrisome evidence, say economists, of rising inequality in the U.S.

Blame goes to the opposite trajectories of financial assets and real estate. Rising stock prices and soaring gains in bonds gave a quick lift to America’s top earners, for whom wealth is mostly concentrated in financial holdings. For most people, however, their homes are their most valuable assets and the housing market kept sliding through 2011. With bond prices at record highs and stocks up 34 per cent in December 2011 from June 2009, America’s eight million richest households saw their mean net worth grow to $3.3 million from $2.6 million. For the other 111 million households, mean net worth fell by $6,000 to an average of $136,426, as home prices declined five per cent in the first 30 months of the recovery.

Today, the average American family is likely better off than the Pew analysis shows. Home prices in the past year have started to recoup ground lost in the crash. The housing revival is starting to lift incomes, too, as construction jobs bring much-needed relief to some of the states with the highest unemployment rates. Jobless claims hit a six-week low in mid-April, said the U.S. Department of Labor last week. Still, with stock prices also on the rise, breaking their 2007 record this year, the wealth gap in America is no doubt alive and well.