It is election season. This is a time when the question of whether people are materially better off than they were four years ago comes up. Comparing March 2024 to March 2020, when a once-in-a-century pandemic broke out, the answer is obviously a resounding yes. But, even considering the winter of 2024 relative to the months before the pandemic shows a stronger and more stable economy that delivered better material well-being for American families now than was the case back then.
Job Stability Is More Pronounced Than Before The Pandemic
The labor market experienced a very rapid recovery due to large fiscal policy interventions. Unemployment dropped sharply as jobs came roaring back. The unemployment rate averaged 3.6% in the three months before the pandemic struck in March 2020, slightly below the 3.8% for the past three months – from December 2023 to February 2024. Moreover, the average length of unemployment stood at 21.1 weeks before the pandemic and 21.3 weeks now. Based on these overall numbers, the labor market looks equally strong now than before the pandemic.
Other indicators, suggest that workers are now in a more favorable labor market than they were immediately before the pandemic. For instance, data from the Bureau of Labor Statistics (BLS) show that the rate of job openings to the number of people employed has been at 5.3% for the past three months, compared to 4.3% from December 2019 to February 2020. The rate of job openings is now still more than 20% higher than it was before the pandemic, giving workers more opportunities for economic mobility. At the same time, the rate of layoffs was one percent for the past three months, or more than 20% lower than in the winter of 2020, according to BLS data. Workers now face fewer threats to their job security than was the case four years ago.
The current job stability now also followed a longer period of labor market tranquility than was the case prior to the pandemic. By February 2024, the unemployment rate had been below 4% for 25 months in a row, the longest such stretch in more than fifty years. In comparison, the unemployment rate had been below 4% for 13 months before the pandemic hit the labor market in March 2020.
Workers care not only about finding a job but also about keeping it or finding a new one when they get laid off. By all measures, the current labor market is more stable than it was before the pandemic.
More Workers Receive Substantial Wage Gains
Widespread job stability has translated into broadly shared wage gains. Average hourly wages were about one percent higher in February 2024 than they were four years ago, according to BLS data. But those averages include workers who have been in the labor market for a long time and those who are newly employed. The changing mix of workers can provide misleading indications of wage growth.
Following the same workers over time to see their wage gains is a better measure of people’s economic security. My colleague, Brendan Duke, reports that a larger share of workers received annual wage increases above the inflation rate at the end of 2023 than was the case at the end of 2019. And a larger share of workers received inflation-adjusted wage gains above 5% in 2023 than was the case in 2019. Those wage gains were especially pronounced among younger workers – those who were between 25 and 34 years old in 2019 and between 29 and 28 years old in 2023. The persistent labor market stability over the past few years has meant that more workers are now able to see wage gains above inflation than four years ago.
Household Wealth Far Outpaces Income
Quarterly Federal Reserve data show that total household wealth – the difference between what people own and what they owe – was $156 trillion at the end of 2023, the equivalent of 7.5 times the average after-tax household income. At the end of 2019, that ratio was 7.1.
Additional data from the Federal Reserve show that wealth gains have been especially pronounced among younger households and Millennials. For example, the average wealth of Millennial households grew by 107.3% from December 2019 to September 2023, the last quarter, for which data are available. In comparison, the average wealth of Gen X households increased by 15.4%, that of Baby Boomer households by 9.1% and that of members of the Silent Generation by 22.1% during that time. Households were, on average, better prepared for an eventual economic emergency, for upward economic mobility, and for a secure retirement now than four years ago.
Homeownership Has Expanded
Increasing homeownership is a key aspect of the growth in average wealth. Somewhat larger shares of households have gained access to the wealth-building- embedded in homeownership. The U.S. homeownership rate was 65.7% at the end of 2023, up from 65.0% at the end of 2019, according to the U.S. Census Bureau. The gains in homeownership were especially pronounced among households 35 to 44 years old, who saw an increase from 60.4% to 62% over that four -year period. This was the largest increase in homeownership among any age group.
Further, the homeownership rate of households with incomes below the median income increased from 51.4% at the end of 2019 to 53% at the end of 2023. In comparison, the homeownership rate of households with incomes above the median declined by 0.1 percentage points over the same period. The homeownership gains were especially pronounced among younger households and households with lower incomes, reflecting a fairly equitable economic recovery.
Households Face Lower Debt Burdens
Debt has become a mainstay of American households’ financial lives, but the debt burden has gone down over the past few years. The total amount of outstanding loans such as mortgages, credit card debt, student loan debt, and auto loans averaged 96.2% of after-tax income in December 2023, according to Federal Reserve data. In comparison, that ratio was 97.5% at the end of 2019. Mortgages fell from 64% to 63.6% of average tax income, credit card debt dropped from 6.7% to 6.3% of after-tax income and other debt – mainly student and auto loan debt – decreased from 18.9% to 18.1% of after tax income over the past four years. Households gradually deleveraged – unburdened themselves of the high levels of debt.
The declines in debt also offset, to some degree, higher interest rate payments. The Federal Reserve reports that the debt service ratio – average debt payments to after-tax income – amounted to 9.8% at the end of 2023, slightly below the 10% at the end of 2019. Households have basically seen strong income gains amid a very quick economic recovery and a strong and stable labor market that have allowed them to reduce their debt burden over the past four years.
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