Highlights
U.S. household wealth has grown at a solid pace over the past several years with only a few brief setbacks when the pandemic struck at the start of 2020 and with the start of interest rate hikes in 2022.
U.S. household wealth rebounded strongly in 2023, growing 8% and hitting a new all-time high in the final quarter of the year, mostly due to gains in equity prices.
At its peak in early 2022, household wealth stood at 8.3 times household disposable income. It has retreated since but remains above its pre-pandemic peak.
Household wealth has grown the fastest among households in the bottom 50% of the wealth distribution, predominantly due to rising real estate prices.
Gains in household wealth should continue to support economic growth this year. With stubborn inflation and buoyant spending, the Federal Reserve is unlikely to cut interest rates until the final quarter of this year.
Chart 1 shows-year over-year percent changes in real and nominal household wealth from 1976 to 2023. Wealth surged in the pandemic's aftermath, reaching a peak of 23% year over year in the first quarter of 2021 in nominal terms and 21% in real terms. However, in 2022 and early in 2023 wealth declined as the federal reserve began raising interest rates in an effort to tame inflation. A year later, wealth surged back, growing 8% in 2023 and regaining all the wealth lost in the prior year.
The U.S. economy slowed to a 1.6% annualized pace in the first quarter of 2024, but underneath the hood, consumer spending remained buoyant, growing 2.5% (annualized). Spending picked up through the quarter with its strongest growth in March, setting up the second quarter for a similarly strong performance.
Consumers have been stalwart in their spending through the highs and lows of the post-pandemic inflationary period, undeterred by the 525 basis point rise in the federal funds rate. This continued strength has presented a challenge for forecasters. Even as the buildup of pandemic-era excess savings has been exhausted for most households (link), broader wealth gains have propped up spending, a trend that is expected to continue over the coming year.1
Household Wealth Rebounded in 2023
The last several years have been good to U.S. household balance sheets. Households came into the pandemic on a strong footing, having grown their wealth by 12% in 2019. That faltered when the pandemic struck, but after just one quarter of decline, household wealth picked up speed again. In 2020 and 2021, it grew at annual pace of 13.4%.
https://economics.td.com/us-household-wealth-props-consumer-spending
