Trump likes to boast about economic growth, and while many have pointed out that many of the policies that produced the rosy figures are leftovers from Obama's policies, it's also important to note that the "growth" is highly localized, with aggregated national figures hiding the incredible economic desperation in the poorest parts of America.
The St Louis Fed has recently released a study of these effects: The Unequal Recovery: Measuring Financial Distress by ZIP Code, writted by Ryan Mather and Juan M Sánchez. The study "creates a data set of household balance sheets at the ZIP code level and examines whether the change since the beginning of the economic recovery in 2010 has been as positive as it seems at the aggregate level." It's a robust methodology that has already been used in similar, earlier studies.
What it finds is that the super-low interest rates set in the Obama years mostly served to inflate asset prices, with a small spillover effect for affluent houses, who were able to refinance their mortgages (which mostly puts money in the pockets of the finance sector, but also benefits the most affluent of refinancers). This allowed the best-off American homeowners to save more, improving their asset-to-debt ratios, producing better financial numbers that were averaged out across the nation.
The economic segregation in American neighborhoods produced a situation where people in two adjacent neighborhoods saw very different outcomes during this period, with debt skyrocketing in one and declining in the other. The levels of debt — and the increase in financial distress — has climbed almost as fast as the wealth of the more fortunate, but the way that these figures are averaged together masked this, making America seem to be enjoying broad prosperity even as its poorest people were getting poorer.
Given that there has been a wide dispersion in measures of wealth growth across ZIP codes since 2010, it seems fair to reconsider what the current distribution of households' financial conditions means for financial stability. If it is the case that growth has been concentrated in the hands of wealthy ZIP codes with low leverage, then the poor and high-leverage ZIP codes that are more affected by wealth shocks may still be vulnerable. What's more, trends in less affluent groups are masked in nationally aggregated statistics by groups with more wealth.
Imagine an economy with two people, one of whom has $1 of wealth and the other $99. Imagine further that the poorer individual's wealth drops to nothing the next year, while the other's remains unchanged. A nationally aggregated statistic will observe $100 of wealth in the first period and $99 in the next, which represents a 1 percent decrease in net wealth. The poorer individual, however, experienced a life-changing 100 percent decrease. Given how the top 1 percent in our country has around 40 percent of all wealth, this contrived example is not entirely unlike the real world. Life-changing shocks to net wealth at the lowest percentiles may be entirely invisible under near trivial changes at the highest percentiles.
St. Louis Fed Study Shows Rising Level of Financial Desperation Among the Poor, Hidden by Aggregates [Yves Smith/Naked Capitalism]