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A paradox of this economic crisis:
Employment is 13 million below its pre-Covid peak
The net worth of American households may be at a record high, thanks to the soaring prices of stocks and homes https://trib.al/gP2brm9
Employment is 13 million below its pre-Covid peakThe net worth of American households may be at a record high, thanks to the soaring prices of stocks and homes https://trib.al/gP2brm9
It's an important difference from the recovery after the 2008 financial crisis.
Then, households spent five years repairing their balance sheets. They largely wonât have to do that again this time, which could help fast-forward the economic recovery https://trib.al/gP2brm9
Then, households spent five years repairing their balance sheets. They largely wonât have to do that again this time, which could help fast-forward the economic recovery https://trib.al/gP2brm9
The recovery after 2008 took longer:
Home prices crashed
Equity cushions tanked
Investment portfolios were bruised
Inequality grew, with home values in working-class and non-white neighborhoods lagging behind those in wealthier neighborhoods https://trib.al/gP2brm9
Home prices crashedEquity cushions tankedInvestment portfolios were bruisedInequality grew, with home values in working-class and non-white neighborhoods lagging behind those in wealthier neighborhoods https://trib.al/gP2brm9
Part of that recovery from 2008 involved years of households paying down debt, while the housing market sat in the doldrums.
Thatâs partly why the recession felt like it lasted for years, even if it technically ended in 2009 https://trib.al/gP2brm9
Thatâs partly why the recession felt like it lasted for years, even if it technically ended in 2009 https://trib.al/gP2brm9
The Great Recession struck at the heart of middle-class wealth:
Home equity
Investment portfolios
Thatâs why it took households so long to recover from it both financially and psychologically https://trib.al/gP2brm9
Home equityInvestment portfoliosThatâs why it took households so long to recover from it both financially and psychologically https://trib.al/gP2brm9
Barring an unexpected crash in the stock market, households seem to be in very different shape in 2020.
Net worth fell by $7 trillion in the first quarter, the most recent for which we have data; but all of that was due to tumbling stock prices https://trib.al/gP2brm9
Net worth fell by $7 trillion in the first quarter, the most recent for which we have data; but all of that was due to tumbling stock prices https://trib.al/gP2brm9
With stocks now at all-time highs, and home prices with them, we should expect third-quarter data to show a new high for net worth https://trib.al/gP2brm9
This doesn't discount the hardship millions of households and small businesses, nor argue against the need for fiscal relief.
The nature of this crisis is unique: some have called it a K-shaped recovery, with stark differences between winners and losers https://trib.al/gP2brm9
The nature of this crisis is unique: some have called it a K-shaped recovery, with stark differences between winners and losers https://trib.al/gP2brm9
The good news is that while todayâs unemployment situation may echo that of 2009, household balance sheets are in much better shape.
We're not likely to go through years of a foreclosure crisis or households paying down debt https://trib.al/gP2brm9
We're not likely to go through years of a foreclosure crisis or households paying down debt https://trib.al/gP2brm9
The personal saving rate stands at 19%, versus a 2009 level of more like 5%, implying that at least some households have a significant cushion to spend more once they feel it's safe to do so https://trib.al/gP2brm9
Elevated levels of home equity could also kickstart a wave of small-business formation next year, perhaps offsetting some bankruptcies this year.
It couldnât do this after 2008, when households lacked that excess equity https://trib.al/gP2brm9
It couldnât do this after 2008, when households lacked that excess equity https://trib.al/gP2brm9
It remains the case that a sustainable economic recovery starts with getting the virus under control.
But once we do so, there are reasons to believe we're in a much better position to have a robust recovery than we were in 2009 https://trib.al/gP2brm9
But once we do so, there are reasons to believe we're in a much better position to have a robust recovery than we were in 2009 https://trib.al/gP2brm9
