If it’s true that the No. 1 rule in financial markets is, “Don’t fight the Federal Reserve,” then a very close second is, “Don’t bet against the U.S. consumer.” This week provided more evidence that Americans are in as good a position as ever to underpin the economy for years to come — with one crazy caveat.

The Fed said on Thursday that household net worth reached another record in the second quarter, jumping by $5.8 trillion to $141.7 trillion, led by a $3.5 trillion gain in the value of equities and a $1.2 trillion rise in real estate. That brings the increase over the four quarters ended June 30 to $23.2 trillion. To put this into context, the all-time high for any one calendar year was $11.6 trillion in 2019.

Diving into the numbers a bit further, net private savings grew at an annualized pace of almost $2.9 trillion after soaring by $4.8 trillion in the first quarter, thanks mainly to federal stimulus efforts. As Bloomberg News noted in its coverage, excess savings have been a key driver of consumer spending, including last quarter, when outlays jumped at one of the fastest paces on record.

What’s been surprising of late is just how strong the consumer has been in the face of rising Covid-19 case counts amid the spread of the highly transmissible delta variant. The government recently said retail sales in August among a control group that is used to calculate gross domestic product and excludes food services, auto dealers, building-material stores and gas stations rose 2.5% in August; the median estimate of economists surveyed by Bloomberg was for no change.

Many economists believe there is a clear link between the value of assets and spending, which they call the wealth effect. Simply, people tend to spend more as the value of their assets rise. This is good news for the optimists because consumer spending accounts for about two-thirds of the economy.

At least that’s the theory in normal times. But these are still not normal times. It’s plausible that the wealth effect is working in reverse, acting as a drag on the economy. The theory goes something like this: Americans are so flush that they feel little pressure to hop back into the workforce anytime soon even after emergency unemployment benefits expired a few weeks ago. The resulting inability of employers to fill slots causes output to slow and restrains the broader economy. 

As outlined by Bloomberg News reporters Katia Dmitrieva and Olivia Rockeman, staffing firms and businesses have yet to see a marked uptick of employees in search of work. “People who have been on the sidelines have by and large stayed on the sidelines,” Richard Wahlquist, president of the American Staffing Association, the country’s largest recruitment-industry group, told Bloomberg News. “Nothing has changed in regard to the benefits that have fallen off and the need for people continues to grow.” The latest data from the Labor Department’s Job Openings and Labor Turnover Survey show that the number of available positions rose to a record 10.9 million in July from 10.2 million in June. That far exceeds the six million or so Americans who lost their jobs at the start of the pandemic and have yet to get back into the workforce. 

It would be irresponsible to say that all of these people without a job are lazy, getting a free ride off the government or worse. There are legitimate reasons that people may be unemployed. For one, many may want to get back to working but can’t because childcare services may still be shut or limiting attendance. And it’s not like back-to-school is going smoothly. Bloomberg News reports that over the past month, with kindergarten through 12th grade in session, the country has reported almost 1 million Covid cases among those under 18. As of Sept. 19, 2,000 schools nationwide had closed, an 18% increase from a week earlier, according to the Burbio tracker.

Then there is the “gray wave” of early retirements. Government data from a few months ago showed that 2.7 million Americans in the 55-and-up set were contemplating dropping out of the workforce years earlier than they’d imagined because of the pandemic. No doubt the surge in household net worth is making that decision easier.

Finally, there are many working-age people who have legitimate health problems and are afraid of returning to public life while the delta variant is still raging and a good part of the population is resisting vaccines. The number of new cases is poised to top four million for the second straight month in September, according to data compiled by Bloomberg. That hasn’t happened since the dark days of December and January.

Sure, it seems like a stretch to say that rapidly rising wealth could be a negative for the economy. But these are unprecedented times, and no textbooks have a chapter on what happens after a global pandemic hits, the economy initially crumbles and the central bank and government respond by flooding the economy and financial markets with many trillions of dollars. It sounds almost as far-fetched as declaring in the early days of the pandemic, when the S&P 500 Index cratered 34% in matter of weeks, that investors would not only be made whole in a few months but would enjoy one of the most powerful bull markets in history along with a real estate boom despite the death toll surpassing that of the devastating 1918 pandemic. Oh wait, all that happened. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Robert Burgess is the Executive Editor for Bloomberg Opinion. He is the former global Executive Editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.

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