The Federal Reserve has released one of its reports into how well Americans and the American economy are doing. And there’re two headline points being picked up from this one, Report on the Economic Well-Being of US Households in 2015, and neither of them really matter all that much or even a darn.
The first is the shocking news that 76 million Americans are struggling financially or only just getting by. The other is that just under half of Americans don’t have the savings to pay an emergency $400 bill, Forbes reported.
The new data underscores just how much American fortunes have changed since the recession that began in 2007, and occurred along with a housing and stock market crash. US households lost more than $12 trillion during that period, with net worth bottoming at $55 trillion in 2009. Since then, wealth has risen by more than $33 trillion. The figures aren’t adjusted for inflation, but with inflation generally low in recent years, wealth has rapidly outpaced inflation.
It was that fall in household wealth which caused the recession. Wall Street falling over didn’t help but the wealth effect means that that loss would have caused a recession come what may. Wall Street did not make the housing market fall over: the falling house market made Wall Street fall over.
Thus the headlines going around telling us that 76 million are struggling. However, this is a rather unimportant number. Because this simply is not the number of Americans who are imminently to be homeless, nor the number on 800 calories a day because they cannot afford more. That’s not how these sorts of comparisons work.
The Fed survey highlights many of Americans’ continuing economic worries. Some 46% of adults say they can’t cover an unexpected $400 expense or would have to borrow or sell something to do so.
Half the country is one burst water pipe away from bankruptcy? Sure, that’s a problem. But note what the problem actually is: they’d have to borrow to cover such a bill. As long as they are able to borrow this is not a problem.
