Yes, the economy is slowing down – but 2021 was the hottest year since 1984. Who won the most?

The US economy unexpectedly contracted in the first quarter, according to GDP data released on April 28. And while the reasons were technical and not seen as signs of weakness, they do add to fears that the United States may be headed for another recession. The Federal Reserve seeks to fight inflation by raising interest rates.

But before we get too concerned about what 2022 will bring, I think, as a financial economist who studies the decisions people and companies make with money and the resulting effects, it’s worth considering 2021, which saw the strongest economic growth in nearly four decades. .

Gross domestic product, which provides a snapshot of the economy by measuring the total value of all goods and services that consumers produce and exchange, rose 5.7% in 2021 after accounting for inflation, the fastest pace since 1984.

Who has benefited from all this growth?

Record gains in US net wealth

A useful way to assess how economic growth affects individuals is to look at personal financial wealth. This is measured by net worth, or the difference between what a person owns and what they owe.

By this measure, the vast majority of Americans are likely to be better off than they were in 2020 — or even before the COVID-19 pandemic — which means they have less debt compared to their assets. This is thanks in large part to trillions of dollars in pandemic-related spending by the US government.


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

The average profit is approximately $55,000 per American.

The richest got most of it

Of course, the mean masks huge variance across groups.

It has already been accurately reported that billionaires have seen their fortunes rise during the pandemic. This was largely driven by double-digit gains in the value of their equity and corporate holdings, while their liabilities grew just 1%.

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

But those in the lower half grew the fastest

The richest may have had the most, but the bottom half’s net worth jumped at the fastest pace.

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

This happened in large part because homeowners saw real estate assets grow much faster than mortgage debt.

While these changes are positive for Americans, both on average and in general, this hasn’t changed the general distribution of wealth much.

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

Eggs earned more, but they still saw a decrease in their share

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

But the percentage gain was highest for people of color — ‘26% for African Americans and 24% for Hispanics. That compares to 14% for white Americans.

As a result, the overall share held by whites has fallen to 83.6%, the lowest since at least 1988 and likely the lowest ever. Blacks’ net wealth rose to 4.4% of the pie, the most since 1992. Hispanics own 2.5% of the total net wealth of the United States.

For context, non-Hispanic white Americans make up about 60% of the population, versus 13.4% for Black Americans and 18.5% for Hispanic or Latino Americans.

It’s hard to say what will happen next, with economic growth slowing. Much of the coronavirus-related aid went to poorer Americans, which helps explain gains for the bottom 50 percent of the population as well as blacks and Latinos. This help is now over.

However, the labor market remains aflame, with the unemployment rate at 3.6% at the end of March 2022, close to its lowest level in half a century. Economists are forecasting very strong growth.

Will this strong economic growth continue?

Count me as an economist who hopes that Americans will continue to benefit from improved jobs to build wealth – even as the economic picture becomes more uncertain.

This article has been republished from The Conversation under a Creative Commons license. Read the original article.

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