Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
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  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, September 24, 2020

AI Summary. An analysis of 60 countries found that nations with manufacturing trade surpluses saw declines in manufacturing employment shares slightly larger than those with deficits, despite producing 21.9% of GDP in manufacturing versus 15.2% and holding employment shares of 18.1% versus 14.8%. This suggests industrial policies targeting trade surpluses may not reverse manufacturing employment decline.

Robert Lawrence Peterson Institute For International Economics
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Trade surplus countries still see manufacturing employment share decline.

Do manufacturing trade surpluses prevent declines in manufacturing employment shares?

Core argument: Across 60 countries from 1995 to 2011, nations running manufacturing trade surpluses saw declines in manufacturing employment shares slightly larger than those in deficit countries.

Analysis of 60 countries from 1995 to 2011 reveals that nations with trade surpluses in manufacturing experienced declines in manufacturing employment shares slightly larger than those with trade deficits. Surplus countries produced 21.9% of their GDP in manufacturing compared to 15.2% in deficit countries, yet their average manufacturing employment share was only marginally higher at 18.1% versus 14.8%. Despite larger shares of manufacturing output in GDP, surplus countries did not avoid declines in manufacturing employment shares, which were as significant as those in deficit countries. This trend persisted even with faster productivity growth boosting trade surpluses, as it simultaneously reduced domestic spending on manufacturing value added and associated employment shares. The data suggests that industrial policies aimed at increasing trade surpluses may not reverse the long-standing decline in manufacturing employment shares.

Takeaways by Macro Roundup® AI

  1. Across 60 countries from 1995 to 2011, nations running manufacturing trade surpluses saw declines in manufacturing employment shares slightly larger than those in deficit countries.
  2. Surplus countries produced 21.9% of GDP in manufacturing versus 15.2% in deficit countries, yet their average manufacturing employment share was only marginally higher at 18.1% versus 14.8%.
  3. Faster productivity growth boosted trade surpluses while reducing domestic spending on manufacturing value added and associated employment shares, suggesting industrial policies targeting surpluses may not reverse the decline in manufacturing employment shares.

New Robert Lawrence, even countries with large trade surpluses in manufacturing have seen manufacturing employment share decline:

“…Using data from a sample of 60 countries, this paper shows that between 1995 and 2011,on average countries with trade surpluses in manufacturing experienced declines in manufacturing employment shares that were slightly larger than the declines in countries with manufacturing trade deficits. Additionally, the declines in manufacturing employment shares were as large in countries where the manufacturing trade balance moved in a positive direction as in those where it declined. This suggests that even if industrial policies generate larger trade surpluses in manufacturing, they may not succeed in reversing the trend declines in manufacturing employment shares that have persisted in many countries for several decades…”

Robert Lawrence, “Trade Surplus Or Deficit? Neither Matters For Manufacturing Employment Shares,” Peterson Institute For International Economics, September 2020, https://www.piie.com/publications/working-papers/trade-surplus-or-deficit-neither-matters-manufacturing-employment-shares

“….Surplus versus Deficit Countries. In the sample reported in table A1, 26 countries had trade surpluses in manufacturing value added that averaged 3.4 percent of GDP and 34 had deficits that averaged −3.2 percent of GDP (see table 1). The share of MVAin overall spending averaged about 18 percent of GDP. The shares of GDP in manufacturing output, however, were very different:On average the surplus countries produced 21.9 percent of their GDP in manufacturing and the deficit countries just 15.2 percent. While the average manufacturing employment share of 18.1 percent in surplus countries was higher than the 14.8 percent in deficit countries, the difference was much smaller than the difference in value added production shares…..”

Snapshot of the Surplus versus Deficit countries

“…. Countries with trade surpluses in manufacturing have larger shares of manufacturing output in GDP and, although less than proportional to their output shares, relatively higher employment shares in manufacturing.But their surpluses did not prevent declines in their shares of manufacturing employment, declines that were as large as in countries with trade deficits. On balance, even though their relatively faster productivity growth in manufacturing tended to boost their trade surpluses, it also reduced their domestic spending on manufacturing value added and the manufacturing employment shares associated with given shares of domestic spending and net MVA exports….”

However those trade surplus countries are able to maintain manufacturing output as a larger share of GDP:

AI Summary. Periods of rapid technological change have historically not favored stockholders, because companies issue new shares faster than earnings and dividends grow, diluting existing holders' claims as obsolete assets are replaced. Stronger economic growth is also associated with higher real interest rates, which reduce the value of future cash flows.

Economist Staff The Economist
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Economic growth does not reliably boost stock prices, as increased share issuance and rising interest rates can offset potential gains from higher productivity and profits.

Does faster economic growth lift stock returns for existing shareholders?

Core argument: Periods of rapid technological change have historically not favored stockholders, with the economic booms of the 1920s and 1990s both ending poorly for investors.

Periods of rapid technological change have historically not favored stockholders, as evidenced by the economic booms of the 1920s and 1990s, which ended poorly for investors. During such times, shares are often issued at a faster rate than the growth in earnings and dividends, leading to dilution and diminished claims on the economy. This is partly due to technological obsolescence, where existing assets are frequently replaced, necessitating new capital issuance. Additionally, stronger GDP growth often correlates with higher real interest rates, which can reduce the value of future cashflows. Historical examples, such as Britain's "railway mania" of the 1840s, illustrate that while social and economic benefits were significant, investor returns were lackluster. This pattern suggests that economic growth does not reliably boost stock prices, as the increased issuance of shares and rising interest rates can offset potential gains from higher productivity and profits.

Takeaways by Macro Roundup® AI

  1. Periods of rapid technological change have historically not favored stockholders, with the economic booms of the 1920s and 1990s both ending poorly for investors.
  2. During technology booms, companies issue shares faster than earnings and dividends grow, diluting shareholders' claims on the economy, partly because technological obsolescence replaces existing assets and requires new capital issuance.
  3. Stronger GDP growth often accompanies higher real interest rates, which can reduce the value of future cashflows, and Britain's 1840s "railway mania" delivered significant social and economic benefits alongside lackluster investor returns.

** “Eight centuries of global real interest rates, R-G, and the ‘supra-secular’ decline, 1311-2018”, by Paul Schmelzing, Bank of England Working Paper No 845 (2020).

Does economic growth boost stock prices?

Economist Staff, “Does economic growth boost stock prices?,” The Economist, September 24, 2020, https://www.economist.com/finance-and-economics/2020/09/24/does-economic-growth-boost-stock-prices

The mechanism for this he speculates is, “…The value of a share is in discounted cashflows. If you focus on the “cashflows” part of this equation, the 1990s narrative had some logic. Productivity picked up. The speed limit of America’s economy was raised. More growth means more profits. But as Mr Bernstein points out, faster growth does not reliably translate into better returns. In periods of rapid growth, shares are issued at an even faster rate than the growth in earnings and dividends. Each share has a diminished claim on the larger economy. Such dilution is attributable to technological obsolescence. The existing stock of plant and machinery has to be junked more frequently in a fast-growing economy—and fresh assets have to be financed by issuing new capital. The “discounted” part of the valuation equation must also be reckoned with. As many a buzz-kill noted in the late 1990s, stronger gdp growth often comes with higher real interest rates. At one point real long-term rates were 4% in America. That diminished the value of future cashflows….”

“… periods of technological change have not been terribly good for stockholders.*The booms of the 1920s and 1990s ended badly. The second quarter of the 19th century—the era of the steam engine, the railways and the telegraph—was no better.The fragmentary evidence Mr Bernstein cites suggests that returns on securities were less than spectacular. Historians of Britain’s “railway mania” of the 1840s find that the social and economic benefits of railways were huge, but investors did not do well….”

Economist references a 2013 William Bernstein Paper that shows that periods of technological change have historically not been good for capital,

Ed Comment:you want the promise of excess profits to motivate risk-taking. …and competition to compete the excess profits away. This is good evidence of less cronyism than the proponents of redistribution (who you now support) claim.

The late 1990s is dismissed as a silly era. People left well-paying jobs to join a gold rush in Silicon Valley. Good money was thrown at sketchy business ideas. It was, though, a time of hope. Talk of new-era economics was a little feverish, but there was a genuine surge in productivity in America.

Today is quite a contrast. Optimism is thin on the ground. This is not just a matter of the uncertainties stemming from covid-19. Real long-term interest rates—rough shorthand for gdp-growth prospects—have rarely if ever been lower. Productivity growth has been dismal.

There is a commonality between then and now: steep share prices. The cyclically adjusted price-to-earnings (cape) ratio, compiled by Robert Shiller of Yale University, stands a shade above 30. That is a little higher than its level before the 1929 crash, although lower than the peak of 2000. In the 1990s optimism about growth was part of the justification for pricey shares. Now we have pessimism and high prices. Paradoxically, there is more sense to the current combination.

A paper in 2013 by William Bernstein points out that periods of technological change have not been terribly good for stockholders.* The booms of the 1920s and 1990s ended badly. The second quarter of the 19th century—the era of the steam engine, the railways and the telegraph—was no better. The fragmentary evidence Mr Bernstein cites suggests that returns on securities were less than spectacular. Historians of Britain’s “railway mania” of the 1840s find that the social and economic benefits of railways were huge, but investors did not do well.

The value of a share is in discounted cashflows. If you focus on the “cashflows” part of this equation, the 1990s narrative had some logic. Productivity picked up. The speed limit of America’s economy was raised. More growth means more profits. But as Mr Bernstein points out, faster growth does not reliably translate into better returns. In periods of rapid growth, shares are issued at an even faster rate than the growth in earnings and dividends. Each share has a diminished claim on the larger economy. Such dilution is attributable to technological obsolescence. The existing stock of plant and machinery has to be junked more frequently in a fast-growing economy—and fresh assets have to be financed by issuing new capital.

The “discounted” part of the valuation equation must also be reckoned with. As many a buzz-kill noted in the late 1990s, stronger gdp growth often comes with higher real interest rates. At one point real long-term rates were 4% in America. That diminished the value of future cashflows.

Consider a particular blend of these influences—gdp growth, dilution and discount rates—and today’s asset prices start to make more sense. The dilution effect has been largely absent. Until covid-19, American companies had been buying back shares, not issuing more. Discount rates were low, and fell further when the virus struck. People seem as worried about tomorrow’s consumption as about today’s. They are paying handsome prices for vehicles—tech stocks, government bonds, and so on—to carry their spending power into the future.

Over the broad sweep of history, returns have tended to fall as societies become wealthier. A recent Bank of England paper concludes that real interest rates worldwide have fallen over the past five centuries.** Mr Bernstein explains this with a thought experiment. In subsistence societies, almost all the harvest is needed to stay alive. Setting aside capital for seed or housing is desirable. But the surplus is scarce so the rewards for doing without today for the sake of tomorrow—the cost of capital—are high. As economies grow richer, they generate more surplus capital. People are less impatient. If you are well-fed, you can afford to wait. A cheeseburger tomorrow is almost as good as one today. Your discount rate is lower.

There is noise around these trends. At times people suddenly worry a lot more about today’s cheeseburger: the start of recessions, for instance. Personal discount rates go up. Risky assets become cheaper—as they did, briefly, earlier this year. There will no doubt be other opportunities to buy stocks more cheaply again. But as Mr Bernstein’s study suggests, such episodes are likely to be more fleeting than in the past.

*“The Paradox of Wealth”, by William J Bernstein, Financial Analysts Journal (2013).

Monday, September 28, 2020

AI Summary. Investment in digital infrastructure rose from about $25bn to nearly $250bn, driven by private spending on communications equipment, software, and computers, yet real net infrastructure investment per capita — which accounts for depreciation and population growth — is at its lowest level since 1983.

Jennifer Bennett, Robert Kornfeld, Daniel Sichel and David Wasshausen National Bureau of Economic Research
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Digital infrastructure investment up tenfold from the 1980s to 2017, reaching nearly $250bn.Real net investment per capita in basic infrastructure remains at its lowest level since 1983.

Has digital infrastructure growth offset declining net infrastructure investment per person?

Core argument: U.S. investment in digital infrastructure rose from $25bn in the 1980s to nearly $250bn by 2017, driven by private spending on communications equipment, software, and computers.

From the 1980s to 2017, investment in digital infrastructure surged from $25bn to nearly $250bn, driven by private sector spending on communications equipment, software, and computers. Despite this tenfold increase, real net infrastructure investment per capita, which accounts for depreciation and population growth, is at its lowest since 1983. This decline is notable in basic infrastructure like roads and bridges, where net investment per capita has decreased since the financial crisis. While digital infrastructure's net stocks have grown, high depreciation rates limit their rapid expansion. Overall, the gap between gross and net investment per capita has widened over the past 20 years, indicating that infrastructure investment is not keeping pace with wear and tear or population growth.

Takeaways by Macro Roundup® AI

  1. U.S. investment in digital infrastructure rose from $25bn in the 1980s to nearly $250bn by 2017, driven by private spending on communications equipment, software, and computers.
  2. Real net infrastructure investment per capita, which accounts for depreciation and population growth, sits at its lowest level since 1983 despite the tenfold rise in digital infrastructure investment.
  3. The gap between gross and net infrastructure investment per capita has widened over the past 20 years, with net investment per capita in basic infrastructure such as roads and bridges falling since the financial crisis.

Just an FYI, NBER with some good statistics on the state of American infrastructure, at the end of 2018 net stock of private/government fixed assets was about $63 trillion, and depreciation was about $3.3 trillion.

Some factoids according to paper real gross infrastructure investment, (2012 prices) peaked at $340 billion in 1968, declined slightly during the next decade and a half, and then grew to reach nearly $800 billion in 2017. Though it varies significantly by differences across categories. For example investment in basic infrastructure, roads, bridges, power grids, dams broadly mirrored that path through 2000s. Since then it has been largely flat, while the share of infrastructure investment in other areas has increased.

These areas include “social infrastructure” ie schools, hospitals, and public safety, as well as digital infrastructure. Digital infrastructure, which is largely private, is the fastest-growing area, includes cell towers, computers, communications equipment, software owned by companies in broadcast and telecom, data processing, internet publishing, and information services. Investment in this area rose about tenfold from the 1980s to 2017.

However it’s worth noting that their calculated real net infrastructure investment per capita, which adjusts gross investment for population growth and depreciation measure. They argue this highlights whether infrastructure investment is keeping up with wear and tear as well as population growth currently stands near its lowest level since 1983. Moreover, the remaining useful life of many types of basic infrastructure has moved lower in recent decades. Net investment per capita, “…For total infrastructure, depreciation is sizable and, on a per capita basis, the gap between gross and net investment on a per capita basis in overall infrastructure has widened during the past 20 years as reported in Figure15. This gap had been growing slowly in earlier decades, but more recently, the divergence has opened up more noticeably. Thus, despite gradual increases in real budget resources being allocated to infrastructure (as measured by real gross investment in infrastructure), actual additions to the real capital stock per capita have been considerably weaker. In terms of the components of total infrastructure, for basic infrastructure (Figure 16),real net investment per capita has drifted downward since the financial crisis and stands at its lowest level since the series hit bottom in 1983. For social infrastructure (Figure 17), real net investment per capita trended up from the mid-1980s through 2007, but then dropped back considerably after the financial crisis (though with a slight pickup in recent years)….”

Jennifer Bennett, Robert Kornfeld, Daniel Sichel and David Wasshausen, "Measuring Infrastructure in BEA's National Economic Accounts," National Bureau Of Economic Research, June 2020, https://www.nber.org/papers/w27446

What’s happening with digital Infrastructure, “…Investment in digital infrastructure rose from about $25 billion annually in the 1980s to almost $250 billion in 2017 (Figure 14). The sharp increase in digital infrastructure since the 1990s arose because of increases in investment in private communications equipment in NAICS 513 and 514 as well as investment in software and computers in these industries.These increases in real investment partly reflect work by BEA and others to quality-adjust the prices of these assets. Interestingly, the pattern of investment in communications structures since the 1990s has been more mixed. This category—which accounted for a modest share of digital investment—includes cell towers but also includes old-fashioned telephone switching structures. Over these decades, the equipment and intellectual property shares of digital infrastructure have increased, while the structures share has fallen. While the net stocks of these digital assets have increased substantially over time, as one would expect (Table 1), the increase in the net stocks and the net stock shares of equipment, software, and computers is perhaps not as rapid as one might expect because depreciation rates for these assets are far higher than the rates for structures. Note that the assets we have classified as digital infrastructure have always been entirely private(Table 3)...”

Snapshot of real net/nominal net shock shares of infrastructure“…These different trends in investment have led to shifts in the composition of capital stocks of basic infrastructure over time (Table 1). Generally, net stocks of most types of infrastructure have risen over time because, even with periods of flat and declining investment, stocks tend to increase because depreciation rates for these assets (mostly structures) are low. One notable exception is railroad transportation: the US had substantial stocks of rail assets at the end of World War II but limited additional investment since then as the nation turned to roads, airplanes, and other forms of transportation. As a result, net stocks of railroad assets decreased markedly over these decades. Over time, the largest increases in real net stocks of basic infrastructure were in highways and streets, electric power structures and equipment, and water and sewer…..”

AI Summary. Census Bureau data in constant 2019 dollars show median household income per household member rose 86.6% since 1967, roughly double the 43.3% rise in real median household income. The gap reflects the decline in average household size, suggesting larger gains in individual economic well-being than household-level figures indicate.

Mark Perry American Enterprise Institute
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@MarkPerry: Percent increase in median household income per household member since 1967 is +86.6%, almost 2x increase in real median household income of 43.3%.

Do household income figures understate gains in individual living standards?

Core argument: Census Bureau data show median household income per household member rose 86.6% since 1967, roughly double the 43.3% growth in real median household income over the same period.

The Census Bureau's recent report highlights a significant +86.6% increase in median household income per household member since 1967, nearly doubling the real median household income growth of 43.3%. This adjustment accounts for the decline in average household size over the decades, providing a more accurate reflection of economic progress. The data, adjusted to constant 2019 dollars, underscores the importance of considering household size when evaluating income growth. This nuanced understanding is crucial for economists and policymakers as it reveals a more substantial improvement in individual economic well-being than aggregate household income figures suggest. The findings emphasize the need for policies that address income distribution and household dynamics to ensure equitable economic growth.

Takeaways by Macro Roundup® AI

  1. Census Bureau data show median household income per household member rose 86.6% since 1967, roughly double the 43.3% growth in real median household income over the same period.
  2. The per-person measure, in constant 2019 dollars, accounts for the decline in average household size since 1967 and is presented as a more accurate reflection of economic progress.

Mark Perry on the new Census Median Household Income numbers, he adjusts the numbers for household size to account for falling household size, “…Median Household Income, Average Household Size, and Income per Householder. The chart above shows: a) the percentage increase in median US household income (in constant 2019 dollars) since 1967, b) the average household size in each year from 1967 to 2019 and c) the percentage increase in median household income per household member since 1967…”

Mark Perry, "More charts and commentary on last week’s Census Bureau report on income," American Enterprise Institute, September 24, 2020, https://www.aei.org/carpe-diem/more-charts-and-commentary-on-last-weeks-census-bureau-report-on-income/

Steve Comment: Re: CPI: I think Table C-1 answers your question. They have all the series converging this year. but if you use the initial CPI-U-RS measure from 2000($59,275) you’ve got an increase of16% (15.9) versus justunder 10% (9.9)if you use the adjusted$62,512as your baseline (all 2019 dollars) “…. show historical income adjusted using the C-CPI-U compared to the CPI-U-RS from 2000 onward. For 2000, the income estimate in 2019 dollars adjusted using the CPI-U-RS is $62,512, compared to $59,275 when adjusted using the C-CPI-U, a difference of 5.2 percent….”

Ed Comment:Of course being the propagandist they are they show the delay in the past rather the present. It's subtle keeps attention focused on "the top line." Using CPU what is the growth?

They built a nice chart showing outcomes by different adjustments using their current method (CPI-U-RS) and C-CPI-U and PCE (also in appendix):

Steve Comment:Census uses (it is in appendix C) CPI-U-RS, which is also the number Perry is citing.

Ed Comment:Income per family member overstates the gains. More interesting and closer to the truth would be income per adult family member. (could we get that? To court family members, they must have the data.) Although some adults don't have children so they can work less rather than to personally consuming more of their earnings.

He finds, “…The size of the average US household has declined steadily over time and fell to an all-time low last year of 2.52 members. That’s a decline of 0.76 household members since 1967 when the average US household size was 3.28 persons. On a percentage basis, that’s more than a 23% decline in the size of the average US household over the last 50 years…. We can adjust for the declining average household size by calculating the real median household income per household member, which almost doubled from $14,615 in 1967 to $27,263 last year. Over that same period, inflation-adjusted median household income increased by 43.3% from $47,938 in 1967 to $68,703 last year. That’s quite a difference — the percent increase in median household income per household member since 1967 of 86.6% is almost exactly twice the percent increase in real median household income over the last half-century of 43.3%....”

AI Summary. U.S. median family income rose 5% while mean income fell 3%, with declines at the top 1%, indicating a narrowing income distribution; real median net worth rose 18% and mean net worth 2%. The Federal Reserve's survey attributes the wealth gains to rising housing and equity prices.

Jesse Bricker, Andrew C. Chang, Lisa J. Dettling, Sarena Goodman, Joanne W. Hsu, Kevin B. Moore, Sarah Reber, Alice Henriques Volz, and Richard A. Windle Board Of Governors Of Federal Reserve System
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Btw 2016 and 2019, median family income rose 5% while mean income decreased 3%, indicating a narrowing income distribution. Real median net worth increased 18% and mean net worth rose 2%.

Is the U.S. income distribution narrowing as family wealth rises?

Core argument: U.S. real median family net worth rose 18% between 2016 and 2019 while mean net worth rose 2%, gains attributed to rising housing and equity prices, according to the Survey of Consumer Finances.

Between 2016 and 2019, the U.S. economy saw a 2.5% annual GDP growth and a drop in unemployment from 5.0% to 3.8%. During this period, median family income rose by 5%, while mean income decreased by 3%, indicating a narrowing income distribution, particularly as the top 1% saw declines. Real median net worth increased by 18%, and mean net worth rose by 2%, driven by rising housing and equity prices. The CoreLogic Home Price Index grew at an annual rate of 5.2%, and corporate equity holdings increased at an 11.5% annual rate, contributing to these wealth gains. Families with high wealth, college education, or White non-Hispanic identity experienced smaller income growth but maintained the highest income levels.

Takeaways by Macro Roundup® AI

  1. U.S. real median family net worth rose 18% between 2016 and 2019 while mean net worth rose 2%, gains attributed to rising housing and equity prices, according to the Survey of Consumer Finances.
  2. Median U.S. family income rose 5% from 2016 to 2019 while mean income fell 3%, pointing to a narrowing income distribution as the top 1% saw declines.
  3. The CoreLogic Home Price Index grew at a 5.2% annual rate and corporate equity holdings at an 11.5% annual rate from 2016 to 2019, alongside 2.5% annual GDP growth and unemployment falling from 5.0% to 3.8%.

Ed Fed’s update of SCF was released. Data shows btw 2016-2019 lower income family saw proportionally higher income growth than richer counterparts who saw large gains btw 2013-2016

Just wanted to make sure you saw highlights “…. During the three years between the beginning of the 2016 and 2019 surveys,real gross domestic product grew at an annual rate of 2.5 percent, and the civilian unemployment rate fell from 5.0 percent to 3.8 percent.3 These changes in aggregate economic performance were unevenly reflected in the income of families with different characteristics…Between 2016 and 2019, median family income rose 5 percent, and mean family income decreased 3 percent (figure 1). These changes suggest that the income distribution narrowed slightly over the period, particularly as the decrease in mean income was mainly driven by families in the top 1 percent of the income distribution(see box 1, “The Data Used in This Article”). These patterns stand in contrast to the 2010-16 period, during which mean income growth vastly outpaced median income growth and the income distribution widened considerably…Between 2016 and 2019, families that were high wealth, had a college education, or identified as White non-Hispanic experienced proportionally smaller income growth than other groups of families but continued to have the highest income.

Housing and equity prices had a positive impact on family net worth, “…The improvements in economic activity along with rising house and corporate equity prices combined to support continued increases in median and mean family net worth (wealth) between 2016 and 2019.4The national CoreLogic Home Price Index increased at an annual rate of 5.2 percent between early 2016 and early 2019, exceeding the rate of consumer price inflation. The value of corporate equity holdings, as measured by a broad stock price index, grew at around an 11.5 percent annual rate between the two surveys, leading to large inflation-adjusted increases in equity holdings.5 These price trends contributed to the following changes in the distribution of household net worth…”

Neil Bhutta, Jesse Bricker, Andrew C. Chang, Lisa J. Dettling, Sarena Goodman, Joanne W. Hsu, Kevin B. Moore, Sarah Reber, Alice Henriques Volz, and Richard A. Windle, of the Board’s Division of Research and Statistics, prepared this article with assistance from Kathy Bi, Jacqueline Blair, Julia Hewitt, and Dalton Ruh, "Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances," Board Of Governors Of Federal Reserve System, September 2020, https://www.federalreserve.gov/publications/files/scf20.pdf

Median net worth grew 18%, mean net worth 2%“…Between 2016 and 2019, median net worth grew 18 percent, and mean net worth rose a modest 2 percent (figure 2). In contrast, the 2010-16 period saw outsized gains in mean net worth relative to median net worth, driven by growth between 2013 and 2016….Families at the top of the income and wealth distributions experienced very little, if any, growth in median and mean net worth between 2016 and 2019 after experiencing large gains between 2013 and 2016…”

AI Summary. Federal Reserve Survey of Consumer Finances data show wealth concentration among the top 1% of US families remained near the survey's historical high while the top 10% share was unchanged, with gains across the broader distribution too small to narrow existing disparities. Income concentration in the top 1% declined, shifting some income share to the bottom 90%.

Jesse Bricker, Sarena Goodman, Kevin Moore, Alice Henriques Volz and Dalton Ruh FEDS Notes
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Wealth concentration in the top 1% of families remained near the historical high point of the 1989-2019 SCF series btw 2016-2019.

Has wealth concentration stayed near its historical high while income concentration eased?

Core argument: Wealth concentration among the top 1% of U.S. families stayed near the high point of the 1989–2019 Survey of Consumer Finances series between 2016 and 2019, while the top 10% share showed no change.

Between 2016 and 2019, wealth concentration in the top 1% of families remained near the historical high point of the 1989-2019 SCF [Survey of Consumer Finances] series, while the top 10% saw no change. Despite no increase in wealth concentration, disparities persisted as gains for the broader distribution were insufficient to reduce existing gaps. Income concentration in the top 1% decreased but stayed at levels typical since 2007, with some income share shifting to the bottom 90%, reversing a decade-long decline. The data, collected during the longest economic expansion on record, show that growth began to spread more equitably across larger segments of the distribution.

Takeaways by Macro Roundup® AI

  1. Wealth concentration among the top 1% of U.S. families stayed near the high point of the 1989–2019 Survey of Consumer Finances series between 2016 and 2019, while the top 10% share showed no change.
  2. Income concentration in the top 1% decreased but remained at levels typical since 2007, with some income share shifting to the bottom 90%, reversing a decade-long decline.
  3. Gains across the broader wealth distribution were insufficient to narrow existing disparities, though Survey of Consumer Finances data collected during the longest economic expansion on record show growth beginning to spread across larger segments of the distribution.

New FDES Note looking at wealth concentration using the new SCR numbers find wealth distribution largely unchanged:

“…Overall, the 2019 SCF data mostly showsmall changes between the 2016 and 2019 SCF distributions. Wealth concentration in the top 1 percent of families is still near the high point in the historical 1989-2019 SCF time series, and concentration in the top 10 percent is unchanged. Althoughwealth concentration did not increase between 2016 and 2019, the gains that accrued to the rest of the distribution did little to reduce the large existing disparities. Income concentration in the top 1 percent fell but remained at the typical levels seen since the 2007 SCF. However, some of the income share earned by the top 1 percent shifted to the bottom 90 percent of the income distribution, reversing a nearly decade-long decline in the income share for that group….”

Jesse Bricker, Sarena Goodman, Kevin Moore, Alice Henriques Volz and Dalton Ruh, "Wealth and Income Concentration in the SCF: 1989-2019," FEDS Notes, September 28, 2020, https://www.federalreserve.gov/econres/notes/feds-notes/wealth-and-income-concentration-in-the-scf-20200928.htm

“…This note provides the first look at the wealth distribution since 2016 (figure B). This note also lays out the best practices for augmenting the SCF wealth concept to characterize—and be more comparable to other measures of—the full U.S. wealth distribution. The data collected in the 2010-2016 SCF surveys indicated that the sustained economic growth that followed the Great Recession had initially accrued primarily to the wealthiest families. These 2019 data were collected at the end of the longest economic expansion on record, when growth spread more equitably to the larger segments of the distribution….”