The recently released State of Working America, 12th Edition, documents in a variety of ways how the last decade in the United States has been a lost decade for all but the very well-off. One manifestation of this lost decade is the decline in the share of households owning stocks.
First, it’s useful to point out that even with the “401(k) revolution,” a surprisingly small share of households ever held any significant amount of stocks. As the figure shows, at its peak in 2001, just more than half (51.9 percent) of U.S. households held any stock, including stocks held in retirement plans like 401(k)s. Furthermore, many of that 51.9 percent held very small amounts—just over a third (37.8 percent) had total stock holdings of $10,000 or more. (Read this snapshot for more on the “democratization of the stock market” that never actually happened.) And even those modest shares have since lost ground. By 2010, less than half (46.9 percent) of all households had any stock holdings, and less than a third (31.1 percent) had stock holdings of $10,000 or more.
The strong rebound in stocks since 2009 amidst persistently high unemployment highlights the disconnect between Wall Street’s financial markets and most people. The stock market simply has little or no direct financial importance to the majority of U.S. households. Since 1989, the top fifth of households consistently held about 90 percent of stock wealth, leaving approximately 10 percent for the bottom four-fifths of households. If you want to assess how the economy is performing for most households in this country, don’t look to the stock market, look to the labor market, and measures of job opportunities like employment and wage growth.