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. Last Updated: 07/27/2016

Fed: U.S. Families Are Richer, But Debt Is Concern

WASHINGTON -- In the most detailed look so far at how families have fared during the United States' long run of prosperity, the Federal Reserve said Tuesday that the strong economy pushed more households into the upper middle class, and that the strong stock market showered benefits on all but those with the lowest incomes.

The report, based on an in-depth survey of the finances of more than 4,000 households in 1998 and comparisons to similar surveys in 1989, 1992 and 1995, also found a sharp rise in the percentage of families owning stocks directly or through retirement plans.

And while generally finding most households in slightly better financial shape relative to 1995, the report flashed some warning signs about the accumulation of debt. The proportion of families that had missed a debt payment by two months or more, for example, rose to 8.1 percent in 1998 from 7.1 percent in 1995.

"While income continued a moderate upward trend, net worth grew strongly, and the increase in net worth was broadly shared by different demographic groups," the report said.

It did not draw any explicit conclusions about the degree to which the gap between rich and poor was growing. But it was relatively clear in suggesting that education levels played a key role in determining economic success.

And the report showed that while white families tended to enjoy strong growth in net worth - assets like stocks and equity in a home minus liabilities like mortgage and credit card debt - nonwhite and Hispanic families were far less likely to have seen a big jump in their wealth from 1995 to 1998.

In many ways, the report simply confirmed what other statistics and common sense had previously suggested: that the combination of a long economic expansion and a bull market on Wall Street left most people making a little more money and feeling somewhat wealthier.

The survey found that the net worth of the median household - that is, the level at which half the families were above and half below - was $71,600 in 1998, up 17.6 percent from 1995, when the figure was $60,900, adjusted for inflation. The Fed's data suggested that much of the gain in net worth flowed to the very wealthiest families. But it also showed substantial gains among households with incomes starting at $25,000.

Median family pretax income rose to $33,400 in 1998, up 2.1 percent from $32,700 in 1995, the Fed said. It was the first time during the 1990s that median income, adjusted for inflation, had surpassed 1989's level of $32,800.

The gains appeared to be concentrated on wealthy families, though self-employed people also had large income gains in the period.

But the data also suggested that more households were slowly pulling themselves out of lower-income groups and more firmly into higher income brackets.

The proportion of families making less than $10,000 a year declined to 12.6 percent of all families in 1998, from 15.1 percent in 1995.

Families making from $10,000 to $24,999 declined to 24.8 percent of the population, from 25.4 percent; families making between $25,000 and $49,999 fell to 28.8 percent, from 31 percent.

Families making $50,000 to $99,999 rose to 25.2 percent of the total, from 21 percent in 1995, while those in the $100,000-and-above bracket rose to 8.6 percent, from 7.4 percent.

While the numbers were positive in the aggregate, they struck some analysts as showing remarkably little improvement given the strength and duration of the expansion.

"We have lived through a stock market such as none of us have ever seen and few of us ever dreamed of," said Henry Aaron, a senior fellow at the Brookings Institution, a liberal-leaning research organization. "Unemployment has fallen to the lowest levels in more than three decades. Yet these global measures of well-being have moved little. Income is flat. Asset holdings are up a few percent."