Useful Stats: Net worth surges 37% coming out of the pandemic; entrepreneurs lead

Coming out of the COVID-19 pandemic, the median net worth of Americans jumped an inflation-adjusted 37%, from approximately $141,000 to $192,000, representing the largest increase reported across available data from the Federal Reserve’s Survey of Consumer Finances (SCF). Breaking net worth down into its two main components, assets and debts, shows that while debts have increased, the sharp rise in assets—both financial and nonfinancial—has driven these numbers. When separating Americans into the self-employed and those employed by another person or company, interesting trends are revealed; self-employed individuals have higher median and average net worths, and, in 2022, for the first time ever, lower median debts. The old adage, it pays to be your own boss, seems to hold.

This article uses data from the 2022 SCF, the most recent release. New editions of the SCF are published triennially and include information on families’ balance sheets, pensions, income, and demographic characteristics. All dollar values are inflation-adjusted to 2022 USD.

An overview of net worth, assets and debt

A look into SCF data reveals that since 1992, the median net worth of families in the U.S. has been on an upward trend over those three decades, save for a period of decline following the 2008 Great Recession. While assets followed a similar trend to the overall net worth values, debt trends appear less easily defined (see Figure 1).

Job-related metrics may help explain some of these trends. Past SSTI analysis found job openings, hires, and separations were negatively impacted by recessionary periods—openings and hires began a sustained downward trend, while separations stagnated before dropping around the end of the period. This is to be expected, as in periods of economic retraction, many tend to spend less money on goods and services, leading to decreased demand and consequently, various cost-cutting measures by many companies, including hiring freezes, layoffs, and furloughs.

While this stands true for periods such as the Dot Com and Great recessions in the early and late 2000s, the COVID-19 induced recession behaved very differently. Despite seeing a similar drop-off in job openings and hires, and an increase in separations, there was an extremely quick rebound in openings and hires, and slightly elevated, rather than stagnated, separations. This differs greatly from the slower, multi-year recoveries from past recessions. This stands true for the metrics available in the SCF, where a rapid recovery, and subsequent net increase, in median and average net worth—metrics directly related to income, and thus jobs metrics—is observed.

To quantify this change, between the 2019 and 2022 surveys, the median net worth of all families captured by the SCF increased by 37%, and average by 22%, while between the 2007 and 2010 SCF the median values decreased by 39% and average values by 15%.

The 37% surge between 2019 and 2022 SCF data represents the largest net worth jump on record. Despite this record surge, wealth inequality has not improved by a notable amount; in 2022, the bottom 25% of Americans have a median net worth of approximately $3,500, while those in the top 10% have a median net worth of nearly $3.8 million, three orders of magnitudes greater.

Note: Average values are often reported and used in policy analyses, yet outliers may bias interpretation of the data. The median values, or those centrally located across the range of data, add richer context. For example, the averages for income inequality are skewed upward from the median, because of the extremely high values of the top percentiles of Americans. Using averages in this case would mask the degree of income inequality.

Figure 1, below, shows these trends over time in more detail, outlining not just net worth, but also its components—assets and debts—from 1989-2022, the life of available data.

Figure 1: Net worth, assets, and debt of all US families, median and average, 1989-2022 when available.

Useful in providing a very generalized picture of Americans’ well-being, looking at all families fails to provide insight into the specific circumstances of real-life individuals. The following will break these same metrics down by those who are self-employed and those employed by another person or company.

While still general categories, the two represent very different scenarios; those employed by others are the more traditional and common paths for making a living in an industrialized economy, often having easy access to amenities taken for granted such as structured retirement accounts and health or vacation benefits, while those who are self-employed are subject to different tax structures, may need to take on business-related debts, and inherently have higher risks and exposures of owning a business.

The SCF data broken down by work status a stark difference can be seen (see Figure 2). Those who are self-employed have substantially higher net-worths than those who are employed by another, with the median difference at $291,000 in 2022 (the average difference in that year was $2.8 million higher, providing another example of how greatly numbers on the extreme ends of ranges may skew policy discussion).

Interestingly, in 2022 the median debts of self-employed persons were lower than those employed by another ($99,000 vs $110,000)–the first time in the span of SCF data. Average debts are, however, still over $80,000 higher for self-employed persons ($253,000 vs $171,000) in 2022, and remained higher in all past years.

That said, the debt of both self-employed persons and those employed by another has increased over time; the median debt of self-employed persons has increased by 65% from 1989 to 2022, while that of employees has increased by 139% over the same period.

The percentage holding debt among those who are employed by another has increased (86% in 1989 compared to 88% in 2022; lowest at 82.8% in 2013) but decreased for those who are self-employed (80% in 1989 compared to 78% in 2022; lowest in 2022).

Figure 2: Net worth, assets, and debt by current work status, median and average, 1989-2022 when available.

Additional fundamental differences can be seen by breaking these numbers down further. In 2022, in terms of median values, both categories of work status have their primary residence as one of their top assets. However, self-employed persons hold over twelve times more business equity than their counterparts.

On the debt side, the largest liabilities of those employed by others are their mortgages, home-secured debt, other residential real estate debt, and home equity lines of credit—all sources directly related to housing—followed by education installment loans. On the other hand, self-employed persons’ largest liability is their other lines of credit, then their various home-related debts.

To view all data used in this article and more, refer to the Federal Reserve’s Survey of Consumer Finances webpage here.