Between federal stimulus, wage growth, pandemic-constrained spending, and increases in home and stock prices, U.S. households’ financial positions in 2022 are “significantly improved relative to 2019.” 

That’s the takeaway from a new report from the Brookings Institution that analyzed how household balance sheets have evolved since the beginning of the coronavirus pandemic. The report found that across income levels, household savings is up, real estate and stock market wealth has increased, real wages have risen, and credit card debt has decreased. 

In aggregate, U.S. households accumulated $2.5 trillion in excess savings between March 2020 and January 2022, the report’s authors estimate.

Seems like it’s all good news, right? It’s curious, then, that despite what is by all accounts a successful recovery from the early coronavirus recession, many people don’t feel better off. In fact, the University of Michigan’s Survey of Consumers found that 40% of Americans consumers reported their personal finances got worse in February, while just 36% reported they got better. Over a quarter of respondents said they expected their finances to get worse in the coming months, the highest share since May 1980.

What explains this disconnect between the data and public perception? Much of it comes down to inflation, says Wendy Edelberg, senior fellow at Brookings and one of the authors of the report. One in three consumers complained about rising prices, according to University of Michigan’s survey. 

“For some households who are doing well and who are financially better off than they were in 2019, they are nonetheless seeing that financial buffer decrease,” she says. “If you’re watching your checking account dwindle, that’s stressful. If you’re watching prices go up in ways that we really haven’t seen in decades, that’s stressful.”

While seeing home values increase is beneficial for the owner, they won’t feel that payoff for decades potentially. Meanwhile, they are paying more for just about everything—especially essentials. Even if they accumulated more savings and wealth over the past two years, they know they would be better off with the same amount of money in their bank account and gas costing less, says Edelberg.

“It’s hard for someone psychologically to make the connection, when they shop for groceries, that ‘Yes, things are more expensive, but oh, I got a raise,’” she says. “Our brains don’t work that way.”

There’s also the ongoing uncertainty around the pandemic, plus new worries over the war in Ukraine, which could be tempering outlook, Edelberg argues.

Not everyone is better off

Of course, many people weren’t able to save more money during the past two years, or they didn’t see their wealth grow—especially those who don’t own a home or any stock investments. Instead, they’ve seen their rent steadily increase, eating away at more of their budget each month. The Brookings report found that the increase in wealth since the start of the coronavirus pandemic is “largely” a result of increases in the stock market and real estate prices. 

“As much as we might think that people’s financial balance sheets are bolstered by what they’ve saved, it pales in comparison to the increase in wealth in these assets,” says Edelberg.

Some households are in a worse spot financially than pre-pandemic, including, primarily, those who were already in a precarious financial position and those who the federal stimulus did not reach for whatever reason. The job market is hot, but not everyone has gotten a raise.

Still, Edelberg says the federal government’s financial response to the pandemic by all accounts worked. The coronavirus recession was the shortest on record. The unemployment rate is near pre-COVID levels. Once pandemic-related federal aid ended, savings levels began to fall back to their pre-pandemic levels, showing the true impact of the stimulus.

Economic inequality is still out of control in the U.S., but “a larger share of recent excess savings are held by lower-income households than historical patterns would suggest.” The highest-income groups benefited the most, but in aggregate, lower income individuals are also in a better position than they were in 2019.

While many households might not feel rich when they are spending more on gas or groceries, the excess savings and wealth accumulation puts them in a better position to weather the next financial storm.

“I think the household sector is in really good shape,” Edelberg says. “This is a success.”