The return of the millionaires


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Unemployment remains at near-record levels, and most Americans are still struggling to rebuild their battered retirement portfolios. But millionaires? They’re baaaack.
Thanks in large part to the rebounding stock market, the number of American households with investments worth at least $1 million climbed 15% in 2009, according to a study of global wealth by Boston Consulting Group.

This boom has not extended to all parts of the American population. While the ranks of millionaires were growing, the unemployment rate went from 7.7% at the beginning of 2009 to 10% at the year’s end, and the economy as a whole shrunk by 2.4%.
These trends led to a greater concentration of wealth -- and greater inequality -- in the United States and around the world. Although millionaires account for a smaller percentage of the U.S. population than they did in 2007 (4.1% versus 4.6%), they control a greater percentage of the wealth (55.2% in 2009 versus 55.1% in 2007).


“It’s been a recession where everyone took a hit -- with the bottom taking a bigger hit. And then the wealthy alone have bounced back,” said Timothy Smeeding, who studies income inequality at the University of Wisconsin.

The new data provide one of the first broad-based looks at the shifts in inequality during 2009, when the U.S. stock market began its rapid ascent after the credit crisis. The new figures are consistent with the quick recovery of investment banks, which have shown skyrocketing profits and bonuses over the last year. Bonuses at New York banks rose 17% in 2009, according to a study by the New York State Comptroller.

The BCG study is based on an analysis of wealth, defined as assets in banks and other investment vehicles around the world. It does not include real estate.
“Assets have recovered much faster than we expected, to be candid,” said Monish Kumar, a managing director in BCG’s New York office.

“Who were the drivers? Who is benefiting most from that development?” Kumar said during an event Thursday morning. “This is not a big surprise; it’s obviously the richer households who are seeing the biggest increase in wealth.”
The rise in inequality during 2009 continues a trend that has been going on over the last few decades, one that took a brief hiatus in 2008 during the recession.

In many countries, wealth recovered in 2009 and returned to levels reached before the financial crisis. Because the United States saw the greatest drop in wealth in 2008 (20%), the significant rise in 2009 (15%) was still not enough to recover all of those losses. The steep drop and rise in the United States occurred largely because the country has a greater percentage of its wealth tied up in stocks than any other region in the world.
The United States also has the most uneven distribution of wealth. In both Japan and Europe, a significant majority of the wealth is in the hands of those with more than $100,000 but less than $1 million.

In the United States, on the other hand, a majority of the wealth is in the hands of millionaires -- the only region in the world other than the Middle East where that is the case. Even in Latin America, which is thought of as a region with great inequality, millionaires control 42% of the wealth. Globally, millionaires control 38% of the wealth, up from 36% in 2008.
Because the figures do not include housing assets, they do not reflect the losses that many Americans experienced in the value of their homes. Smeeding’s recent studies suggest that the drop in housing prices has hit middle-class families particularly hard.


The analysts at BCG said that even though the wealthy have bounced back, many have still not regained their trust in the financial system -- and they are still wary of the stock market and investment managers, who saw their revenues decline over the last year.
“It doesn’t feel to them like they are fully back in business,” said Bruce Holley, in BCG’s New York office.

-- Nathaniel Popper