According to the Federal Reserve, Household wealth increased to $84.9 billion in the first quarter of this year, driven by $487 billion increase in stocks and $503 billion increase in the value of homes.
The news should be celebrated; however, those who said the improvement largely went to the wealthiest since 10% of the population own 80% of the stocks seized upon it immediately. In the meantime, home equity has bounced back to 55.6% by a crushing 36.9% in the first quarter of 2009.
Interestingly, the rate of growth for household debt has dropped substantially for the past year. This means people aren’t buying their rebound in wealth on paper. The data underscores a feeling we know only too well. Something is wrong with the economy. Sure, it is on the mend, but there is no oomph, just anger and finger pointing.
As for the data, it is just a reminder that you must put your money to work.
Consumers complained about a lack of wage growth before the Great Recession began. There was a shift of people saving money to buy stuff now rather than investing in things that would pay a dividend later, such as college, a house, or even a retirement savings. We are a society of instant gratification. However, on the other end of the spectrum, many are bitterly waiting for the world to end. Therefore, gas gets cheap and we save money.
As the evidence mounts, wages are ready to move higher from middle wages, to middle managers, and to the middle class in general. There is a big question mark as to where that money will reside. Will that cash circulate through the economy and create jobs and confidence in the process; or will it nudge all those extra bucks that did not stay at the filling station or inside the old coffee can?
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Moreover, I am still mystified by how there could be a record amount of job openings as fewer people are quitting their jobs. There’s evidence that people are getting higher pay when switching jobs. In fact, millennials are said to be racking up raises for shifting to new gigs in a matter of months. Yet that is probably anecdotal at its best, although there’s no doubt that several industries from the Science, Technology, Engineering, and Mathematics (STEM) segment of the economy and construction workers are in high demand.
Young adults seem afraid or lack the confidence to seek new employment.
Maybe worker confidence will improve incrementally as consumer sentiment has since the low points of 2009. Confidence is trailing the stock market and housing is rebounding by a million miles.
There is no doubt something is wrong, but the misinterpretation could make things a whole lot worse. The path to wealth is open to all Americans; but ‘belief’ is the first and the most important step.
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