Every American Is Experiencing a Different Economy
When the economic statistics are reported each month, it’s easy to forget that they are just averages. Economic growth, unemployment, home prices and even inflation vary enormously from one place to another and from one part of the population to another. As a result, changes in the national numbers can create a false impression. The averages may be improving because some groups of Americans are faring a whole lot better, while other groups in the population may not be benefiting at all. But you can only determine the real trends if you consider the people who are being left out.
When the economy is humming along steadily, the variations are not so important. During a downturn, on the other hand, or in the early stages of an upturn, divergences become much greater. So today, whether you’re trying to assess the economy, anticipate the direction of the stock market, or gauge the prospects of candidates in the November elections, you have to consider the individual economic situations of many different groups of people. There are lots of ways to divide up the U.S. population, of course, and some of them overlap. Here are the most important:
Wealth and Income. During the recent recession, net worth fell most sharply for middle-class families with incomes between $50,000 and $100,000. The reason is that home equity represents a disproportionately large percentage of their wealth. Moreover, home prices are actually slightly lower today than they were when the recovery began. By contrast, the stock market has gained about 50% since the economy began its slow recovery in 2009. That has greatly benefited Americans with six-figure family incomes, since they are more likely to have substantial investments in stocks and mutual funds. As a result, the most affluent families with substantial exposure to the stock market have been seeing a rebound for more than two years, while middle-class families that have most of their wealth in their homes are still in a depressed economy. So are lower income families who have minimal assets and are more directly affected by unemployment, currently 8.2%, which has remained at recession levels since the recovery began. And here’s another wealth-related variation: As a general rule, groups with the lowest incomes and net worths feel changes in gasoline prices and food prices the most.