When the Federal Reserve's Survey of Current Finances for 2004 was released, the leading newspapers naturally indulged their propensity to make the news look as bad as possible.
"U.S. families' wealth stagnated during the economy's recession and recovery from 2001 through 2004, as lackluster wage growth, sagging stock prices and rising debt levels offset the gains from higher home values," wrote The Washington Post. "For the typical American household," added The New York Times, "net worth -- the sum of all assets less debts -- barely increased, to $93,100 from $91,700."
The figures are for median wealth, not for typical households (whatever that means). Median just means half had more and half less. Young people always start with less, but don't stay young forever. What is surprising is not that median wealth did not rise much from 2001 to 2004, but that it rose at all. The Fed's survey for 2001 was taken before September 11, which makes wealth that year look much better than it was after the disaster. But even for the year as a whole, the S&P 500 averaged 1194.2 in 2001 compared with 1130.7 in 2004. The NASDAQ fell from 2035 to 1986.5 from 2001 to 2004. But this is 2006, not 2004. Household wealth did indeed fall dramatically from March 2000 to March 2003, but has since rebounded quite impressively.
After the previous recession in 1990-91, it took longer for real household net worth to recover. Median net worth was virtually unchanged from 1989 to 1995, but rose more than 31 percent by 2004. The mean average of wealth fell from $270,000 in 1989 (in 2004 dollars) to $260,800 in 1995, but reached $448,200 in 2004. When the news came out during the election year of 1996 that household net worth had fallen for the past six years, do you suppose The Washington Post and New York Times wrote about that with the same sense of despair and tragedy they just used to describe a three-year increase?
This year, even The Wall Street Journal's urge to be politically correct apparently overcame all caution about being statistically correct. The Journal imagined the Fed's report "found a widening gap between households at the top and the bottom of the economic ladder," because "the net worth of the typical family in the bottom 25 percent fell 1.5 percent." A correction the next day mentioned that net worth among the bottom 25 percent had increased by 41.7 percent. But facts won't keep true believers from believing in a widening gap.