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How Great Is Our Economy If The Bottom 50%’s Share Of The Nation’s Wealth Has Plummeted Since 2009?
How Great Is Our Economy If The Bottom 50%’s Share Of The Nation’s Wealth Has Plummeted Since 2009?
Authored by Charles Hugh Smith via OfTwoMinds…
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Authored by Charles Hugh Smith via OfTwoMinds blog,
Something has been going very wrong in the US economy for a very long time, and whatever is going wrong accelerated from 2009 to the present.
Longtime readers know I've covered America's soaring wealth and income inequality for many years, and so I read economist Noah Smith's recent post entitled Working-class wealth is improving with keen interest. I respect Noah's work, which is why I follow his Substack posts.
Here are some excerpts from his commentary:
"One of the truisms many Americans learned during the 2010s that turned out not to be so true is the idea that the wealth of the working class is relentlessly falling behind. The likely reason that people "learned" this "fact" is that it was true up until the financial crisis of 2008, and people didn't recognize it and get mad about until the crash.
For that we have to turn to the (Federal Reserve's) FRED website. But when we do, we can see that the bottom 50% of households have seen strong wealth growth in real terms since 2012.
Now, 50% of the country's households holding only 2.5% of the wealth is still very dramatic inequality. We should remember that some piece of this is just the life-cycle of wealth -- young people who haven't had time to build wealth and old people who have spent down most of their retirement account will look poor even if they will be comfortable or were comfortable in middle age. But even after accounting for that life-cycle effect, America is going to have very steep wealth inequality.
Trends are important, though. And this trend is a positive one. The fact that working-class wealth has been recovering as a share of America's total wealth for a decade, even as every group has increased its wealth, says that something is going right in the U.S. economy. A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others."
Data hound that I am, I decided to explore the FRED database for charts that would confirm his no-doubt sincerely issued claim that "The fact that working-class wealth has been recovering as a share of America's total wealth for a decade, even as every group has increased its wealth, says that something is going right in the U.S. economy."
What I found is the exact opposite of his claim: the bottom 50%'s share of total assets and financial assets have fallen sharply since 2009. In the greatest expansion of net worth / assets / wealth in US history, the bottom 50%'s share of this massive expansion of wealth has declined by 25%.
Rather than increase as Noah claimed, the working class's share of America's total wealth has plummeted. Let's look at the data, as depicted on the FRED charts. Let's start with the chart Noah referenced, which does indeed show the wealth (net worth) of the bottom 50% rising smartly over the past decade, from a nadir of less than $1 trillion to $3.6 trillion in 2023:
For context, let's look at household net worth, which rose an astounding $90 trillion from $56 trillion in 2009 to $146 trillion in 2023. As the chart above shows, the bottom 50% garnered $3 trillion of this $90 trillion in gains, or 3%. This modest percentage is not supportive of Noah's claim that "A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others."
Here we see the 167 million Americans in the bottom 50% own $3.6 trillion, the top 1% --3.3 million Americans--own $45 trillion, a staggering 12.5X the net worth of the bottom 50%.
The top 0.1%--330,000 Americans--own $18.5 trillion, an astonishing 5X the net worth of the 167 million Americans in the bottom 50%.
Next, let's look at each segment's share of total assets. The bottom 50%'s share of assets plummeted 25% since 2009, from 8% to 6%.
The share of the top 1% soared 26% since 2009:
The share of the top 0.1% skyrocketed 34% since 2009:
These charts show the bottom 50%'s share of America's assets hasn't risen, it's cratered. The rising tide of $90 trillion in additional wealth since 2009 has raised the yachts of the top 1% and the top 0.1% such that the bottom 50% share of assets declined. The bottom 50%'s leaky boat--as measured by their share of assets--actually took on water.
Financial assets are important because financial assets generate income and economic security. let's look at each segment's share of the nation's vast financial assets.
The bottom 50%'s meager share--167 million American's share of the nation's stupendous financial assets--fell 26% from 3.1% to 2.3%--a sliver so thin that it's essentially signal noise.
Meanwhile, the top 1%'s share of financial assets rose 24% since 2009, more than 15X the bottom 50%'s share of financial assets.
The top 0.1%'s share of financial assets soared 34%% since 2009, 6.5X the bottom 50%'s share of financial assets.
Noah's claim of "A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others." is akin to being behind 49-0 in the waning minutes of the fourth quarter and cheerleading the team's increase in total yardage gained from 11 yards in the 2nd quarter to 33 yards in the 3rd quarter--a positive trend.
Noah claimed the financial metrics of the bottom 50% are a positive trend. If we consider the bottom 50%'s share of total assets and financial assets, this claim is not supported by the FRED data.
Noah then extended this claim to an even larger claim that "something is going right in the U.S. economy."
The message of the Federal Reserve's data depicted in the charts is the exact opposite: something has been going very wrong in the US economy for a very long time, and whatever is going wrong accelerated from 2009 to the present.
Those actually living in the bottom 50% (as opposed to jetting around to conferences) might find Noah's ponderings that the bottom 50%'s impoverishment is a statistical anomaly generated by temporarily impecunious youth climbing their way to wealth, and retirees who spent their wealth and are now comfortably impoverished somewhat risible. The reality is more likely mac and cheese from the dollar store prepared in an overcrowded flat or a trailer park and rapacious credit card interest rates and exploitive late fees.
By all means, let's look at the data before making expansive claims.
* * *
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One city held a mass passport-getting event
A New Orleans congressman organized a way for people to apply for their passports en masse.
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While the number of Americans who do not have a passport has dropped steadily from more than 80% in 1990 to just over 50% now, a lack of knowledge around passport requirements still keeps a significant portion of the population away from international travel.
Over the four years that passed since the start of covid-19, passport offices have also been dealing with significant backlog due to the high numbers of people who were looking to get a passport post-pandemic.
Related: Here is why it is (still) taking forever to get a passport
To deal with these concurrent issues, the U.S. State Department recently held a mass passport-getting event in the city of New Orleans. Called the "Passport Acceptance Event," the gathering was held at a local auditorium and invited residents of Louisiana’s 2nd Congressional District to complete a passport application on-site with the help of staff and government workers.
'Come apply for your passport, no appointment is required'
"Hey #LA02," Rep. Troy A. Carter Sr. (D-LA), whose office co-hosted the event alongside the city of New Orleans, wrote to his followers on Instagram (META) . "My office is providing passport services at our #PassportAcceptance event. Come apply for your passport, no appointment is required."
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The event was held on March 14 from 10 a.m. to 1 p.m. While it was designed for those who are already eligible for U.S. citizenship rather than as a way to help non-citizens with immigration questions, it helped those completing the application for the first time fill out forms and make sure they have the photographs and identity documents they need. The passport offices in New Orleans where one would normally have to bring already-completed forms have also been dealing with lines and would require one to book spots weeks in advance.
These are the countries with the highest-ranking passports in 2024
According to Carter Sr.'s communications team, those who submitted their passport application at the event also received expedited processing of two to three weeks (according to the State Department's website, times for regular processing are currently six to eight weeks).
While Carter Sr.'s office has not released the numbers of people who applied for a passport on March 14, photos from the event show that many took advantage of the opportunity to apply for a passport in a group setting and get expedited processing.
Every couple of months, a new ranking agency puts together a list of the most and least powerful passports in the world based on factors such as visa-free travel and opportunities for cross-border business.
In January, global citizenship and financial advisory firm Arton Capital identified United Arab Emirates as having the most powerful passport in 2024. While the United States topped the list of one such ranking in 2014, worsening relations with a number of countries as well as stricter immigration rules even as other countries have taken strides to create opportunities for investors and digital nomads caused the American passport to slip in recent years.
A UAE passport grants holders visa-free or visa-on-arrival access to 180 of the world’s 198 countries (this calculation includes disputed territories such as Kosovo and Western Sahara) while Americans currently have the same access to 151 countries.
stocks pandemic covid-19 grantsUncategorized
Fast-food chain closes restaurants after Chapter 11 bankruptcy
Several major fast-food chains recently have struggled to keep restaurants open.
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Competition in the fast-food space has been brutal as operators deal with inflation, consumers who are worried about the economy and their jobs and, in recent months, the falling cost of eating at home.
Add in that many fast-food chains took on more debt during the covid pandemic and that labor costs are rising, and you have a perfect storm of problems.
It's a situation where Restaurant Brands International (QSR) has suffered as much as any company.
Related: Wendy's menu drops a fan favorite item, adds something new
Three major Burger King franchise operators filed for bankruptcy in 2023, and the chain saw hundreds of stores close. It also saw multiple Popeyes franchisees move into bankruptcy, with dozens of locations closing.
RBI also stepped in and purchased one of its key franchisees.
"Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the 12 months ended Sept. 30, 2023," RBI said in a news release. Carrols also owns and operates 60 Popeyes restaurants in six states."
The multichain company made the move after two of its large franchisees, Premier Kings and Meridian, saw multiple locations not purchased when they reached auction after Chapter 11 bankruptcy filings. In that case, RBI bought select locations but allowed others to close.
Image source: Chen Jianli/Xinhua via Getty
Another fast-food chain faces bankruptcy problems
Bojangles may not be as big a name as Burger King or Popeye's, but it's a popular chain with more than 800 restaurants in eight states.
"Bojangles is a Carolina-born restaurant chain specializing in craveable Southern chicken, biscuits and tea made fresh daily from real recipes, and with a friendly smile," the chain says on its website. "Founded in 1977 as a single location in Charlotte, our beloved brand continues to grow nationwide."
Like RBI, Bojangles uses a franchise model, which makes it dependent on the financial health of its operators. The company ultimately saw all its Maryland locations close due to the financial situation of one of its franchisees.
Unlike. RBI, Bojangles is not public — it was taken private by Durational Capital Management LP and Jordan Co. in 2018 — which means the company does not disclose its financial information to the public.
That makes it hard to know whether overall softness for the brand contributed to the chain seeing its five Maryland locations after a Chapter 11 bankruptcy filing.
Bojangles has a messy bankruptcy situation
Even though the locations still appear on the Bojangles website, they have been shuttered since late 2023. The locations were operated by Salim Kakakhail and Yavir Akbar Durranni. The partners operated under a variety of LLCs, including ABS Network, according to local news channel WUSA9.
The station reported that the owners face a state investigation over complaints of wage theft and fraudulent W2s. In November Durranni and ABS Network filed for bankruptcy in New Jersey, WUSA9 reported.
"Not only do former employees say these men owe them money, WUSA9 learned the former owners owe the state, too, and have over $69,000 in back property taxes."
Former employees also say that the restaurant would regularly purchase fried chicken from Popeyes and Safeway when it ran out in their stores, the station reported.
Bojangles sent the station a comment on the situation.
"The franchisee is no longer in the Bojangles system," the company said. "However, it is important to note in your coverage that franchisees are independent business owners who are licensed to operate a brand but have autonomy over many aspects of their business, including hiring employees and payroll responsibilities."
Kakakhail and Durranni did not respond to multiple requests for comment from WUSA9.
bankruptcy pandemicUncategorized
Industrial Production Increased 0.1% in February
From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 p…
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Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points below its long-run (1972–2023) average.Click on graph for larger image.
emphasis added
This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).
Capacity utilization at 78.3% is 1.3% below the average from 1972 to 2022. This was below consensus expectations.
Note: y-axis doesn't start at zero to better show the change.
The second graph shows industrial production since 1967.Industrial production increased to 102.3. This is above the pre-pandemic level.
Industrial production was above consensus expectations.
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