What do the Simpsons have in common with about 50% of American households? Not just a love for donuts or a kid who likes to say “eat my shorts”. They both belong to the middle class.
With government help and less spending during the lockdown, America’s middle class has been able to save unprecedented amounts of money during the pandemic. American households had amassed about $2.5 trillion in additional savings from March 2020 to January 2022.
Now, new data made available by Bloomberg and produced by economists at the University of California, Berkeley reveals that the wealth of middle-class families hit an all-time high of $393,300 in March 2022. That’s 120 $000 more than the average middle-class adult in America was when Donald Trump took office in January 2017, Bloomberg points out.
It was a golden age for the middle class, which began to shrink before the pandemic. But that wealth boom has faded: By mid-October, the average wealth of the middle 40% had fallen 7% since March, according to Berkeley economists. This percentage represents an estimated decline in wealth of approximately $27,000. That’s a big drop: this kind of drop hasn’t been seen since the global financial crisis of 2008.
It’s the result of a perfect storm of economic uncertainty brewing: interest rates are rising, the market is collapsing, recession talk is everywhere, and inflation has been high for decades means that money in the bank is not worth as much as before. As the cost of living rises, more households have dipped into their pandemic-era savings.
And fewer Americans earn as much as they spend. According to data from the Financial Health Pulse 2022 US Trends Report, the number of Americans considered financially healthy fell for the first time in the five years the survey was run (from 34% to 31% in 2022). It is still higher than pre-pandemic levels, when households were less able to save.
While we are talking about a recession, the difficulty of this income bracket to keep up with the cost of living is not a good sign for the state of economic security.
The middle class is often held up as a symbol of the American dream, often associated with a stable income and property – something that has become harder to sustain as inflation crunches and makes spending, say, more expensive. Tied to seed narratives, the success of these households is sometimes taken as an indicator of the nation’s success (or at least used as rhetoric in many US elections). As this income bracket shrinks and inequality increases, the dream of many being fed also begins to fade.
The number of people who are truly part of the middle class has decreased. Sixty-one percent of American adults were considered middle class in 1971, falling to just 50% in 2021, according to analysis by the Pew Research Center. Fewer Americans consider themselves middle class than before the Great Recession.
While wages have increased for upper class individuals to match inflation, the same wage increases have not always been found for the middle class. A majority of middle-class households (75%) believe inflation is rising at a faster rate than their income, according to a survey by financial services firm Primerica.
While data from Bloomberg shows middle-class wealth is still quite high, anxiety plagues these households as the economy eats away at their newly accumulated wealth. That’s enough for someone to say oh.
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