As it enters its 11th year, the US economic expansion is now the longest on record – a streak that has reduced unemployment, boosted household wealth, revived the housing market and helped fuel an explosive rise in the stock market.
Yet even after a full decade of uninterrupted economic growth, the wealthiest Americans now hold a greater share of the nation’s wealth than before the Great Recession began in 2007. And income growth has been slow compared to historic standards, leaving many Americans feeling stuck in place.
These trends help explain something unique about this expansion: it is by far the least celebrated economic recovery in decades.
As public discontent has grown, the problem has become one for political candidates to exploit – starting with Donald Trump in 2016. Today, some of the Democrats running to challenge Trump for president have built their campaigns around proposals to tax wealth, to raise the minimum wage. or ease the financial pressure of medical care and higher education.
America’s financial disparities have widened in large part because the means by which people create wealth have become more exclusive since the Great Recession.
Fewer middle-class Americans own homes. Less is invested in the stock market. And house prices have risen much more in wealthier metropolitan areas on the coasts than in more modestly priced cities and rural areas. The result is that wealthy homeowners are now sitting on vast sums of equity and capital gains, while tens of millions of ordinary households have been left mostly on the sidelines.
“The recovery has been very disappointing from an inequality perspective,” said Gabriel Zucman, a UC Berkeley economist and leading expert on income and wealth distribution.
Household wealth — the value of homes, stock portfolios and bank accounts, minus mortgage and credit card debt and other loans — has jumped 80% over the past decade. More than a third of that gain — $16.2 trillion in wealth — went to the top 1%, according to Federal Reserve figures. Only 25% of this amount went to middle to upper class households. The bottom half of the population earned less than 2%.
Nearly 8 million Americans lost their homes during the recession and its aftermath, and steep price increases since then have put homeownership out of reach for many potential buyers. For America’s middle class, the homeownership rate fell to around 60% in 2016 from around 70% in 2004, before the housing bubble, according to separate Fed data.
The other major driver of household wealth – the stock market – hasn’t benefited most people much either. The longest bull market in US history, which surpassed its own 10-year mark in March, has more than quadrupled stock prices. Yet the proportion of middle-income households who own stocks has actually declined.
The Fed calculates that about half of middle-income Americans held stocks in 2016, the most recent year for which data is available, up from 56% in 2007. This includes people who hold stocks in retirement.
The drop in stock market participation occurred primarily because more middle-income workers took contracts or other jobs that offered no retirement savings plan, the Fed concluded.
Hannah Moore, now 37, has struggled to save since graduating from college in December 2007, the same month the Great Recession officially began. She has worked almost continuously since then, despite a few layoffs.
“I had several jobs, all at the same time,” she said. “It’s just not the easiest of decades if you’re trying to start a career.”
She works for a design company in Los Angeles that contracts luxury apartment developers who build rental housing for high-tech employees. She likes the job. But she struggles with the high costs of Los Angeles.
Moore says she could afford a monthly mortgage payment. But she doesn’t have the savings for a down payment. About half of her income, she calculates, is eaten up by rent, health insurance and student loan repayments of $850 a month.
As financial inequality has widened over the past decade, racial disparities in wealth have also widened. The typical wealth of a white household is $171,000, nearly 10 times that of African Americans. This is seven times more than before the housing bubble, and it mainly reflects large losses in housing wealth for black people. The homeownership rate among African Americans fell to a record low in the first three months of this year.
Most economists argue that higher income growth is needed to allow more Americans to save and build wealth.
Zucman favors a higher minimum wage, cheaper access to a college education and more family-friendly policies to allow more parents to work. He and his colleague Emmanuel Saez, also an economist at UC Berkeley, helped formulate Senator Elizabeth Warren’s proposed wealth tax on fortunes over $50 million to help pay for these proposals.
Income growth has lagged in part because for most of the expansion, employers have had a glut of workers to choose from to fill jobs, leaving them with little pressure to raise wages.
It was only in 2016 that the unemployment rate fell below 5%. The average hourly wage eventually began to rise, with the lowest earning workers receiving the fastest average earnings.
“Overall, there is growing inequality,” said Elise Gould, an economist at the liberal Institute for Economic Policy, “with signs of hope at the bottom. It just took a long time.