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The American middle class is at the end of an era
BY Chloe Berger
November 2, 2022, 5:32 PM UTC
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With government assistance and less spending during lockdown, America’s middle class was able to save unprecedented amounts of money during the pandemic. U.S. households had socked away about $2.5 trillion in extra savings from March 2020 to January 2022.
Now, new data made available by Bloomberg and produced by University of California, Berkeley economists reveals that wealth for middle class families reached a record level of $393,300 during 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 era for the middle class, which began shrinking pre-pandemic. But that wealth boom has been fading: In mid-October, the average wealth of the middle 40% had dropped by 7% since March, according to Berkeley’s economists. That percentage represents an estimated decline in wealth by around $27,000. It’s a big fall: that kind of decrease hasn’t been seen since the 2008 global financial crisis.
It’s the result of a perfect storm of economic uncertainty brewing: interest rates are rising, the market is tanking, recession rumors are everywhere, and decades-high inflation means that cash in the bank isn’t worth as much as it used to. As the cost of living increases, more households have dipped into their pandemic-era savings.
And fewer Americans are earning as much as they were spending. According to data from Financial Health Pulse 2022 U.S. Trends Report, the number of Americans qualifying as financially healthy dipped for the first time in the five years the survey was run (from 34% to 31% in 2022). It’s still higher than pre-pandemic levels, when households were less able to save.
As talk of a recession swirls, this income bracket’s difficulty to keep up with the cost of living isn’t a great sign for the state of economic security...