Household net worth is up, not down

Over the weekend, the New York Times ran an article titled "The Typical Household, Now Worth a Third Less." It cites a study by the Russell Sage Foundation which claims that "The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline." I've since seen this article widely quoted, since its results are nothing less than shocking.

But is the claim true? I very much doubt it.

Consider the dramatic contrast to be found in the household net worth figures compiled by the Federal Reserve, which I have featured here almost every quarter for the past several years. My most recent post on the subject is here, and I highlight the graphs contained in that post below:

According to the Fed's data, total household net worth rose from $49.5 trillion in 2003 to $81.8 trillion as of March, 2014, for a 65% gain. I adjusted that for inflation (using the GDP deflator) and found that in today's dollars, total household net worth rose from $60.9 trillion in 2003 to $81.8 trillion, for a 34% gain. On a per capita basis, real net worth increased from $209.6K in 2003 to $255.7K in 2014, for a 22% gain. 

If per capita net worth in real terms increased 22% from 2003 to 2014, according to the Fed's data, how can the Russell Sage Foundation claim that real net worth for the typical household fell by 36%? Something's very wrong here, and it's not because of the changing number of people in the typical household. My money is on the Fed's data, which are much more comprehensive than the Russell Sage Foundation's data.

Moral of the story: don't believe everything you see in the newspapers. It is almost certainly the case that the typical household's net worth today is substantially more than it was in 2003.

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