This week, we reported on the Pew Research Center’s findings that the 2000s were a lost decade for the middle class, as a result of declining household income and shrinking net worth over that 10-year period. Now, Pew reports that in the two years since the end of the Great Recession, Americans continue to shed resources.
In fact, the decline of household median income in the last two years matched the drop that occurred during the recession itself, Pew reports. In 2009, when the recession ended, median household income was $52,195, and in 2011 (the most recent year available), it was $50,054, a decline of 4.1 percent. Back in 2007, before the recession, median household income was $54,489. That leads Pew to conclude that “recovery from the Great Recession is bypassing the nation’s households.”
Those households are already in a weakened state. As Pew reported earlier, median net worth of middle-income families fell to $93,150 in 2010, compared to a peak of $152,950 several years earlier. And net worth is an important measure of financial security, since it offers households much-needed cash if they find themselves facing unplanned expenses or job losses. At the same time, median household income for middle-income families fell to $69,487 in 2010 compared to $72,956 at the beginning of the decade.
Pew’s analysis of data from the Census Bureau and other sources also drew the following conclusions:
- America is experiencing an unpleasant case of déjà vu: Households also continued to deal with lower incomes in the two years following the 1990 to 1991 recession and the 2001 recession. (But Pew points out that those income losses were not as great as the ones Americans are currently experiencing.)
- American households have reached an undesirable milestone: A dozen years have passed “without the median income exceeding a previous peak,” Pew reports. That’s because median household income peaked in 1999, when it was $54,932 (in 2011 dollars).
- The recession and slow recovery have also contributed to a rising poverty rate. It was 15 percent in 2011, compared to 12.5 percent in 2007.
- Between 2007 and 2010, median household wealth (assets minus debt) fell by 39 percent, to $79,431.
- Unemployment has also become more widespread, with almost double the number of families reporting at least one unemployed member. In 2007, 6.3 percent of families said they had at least one unemployed member, and by 2009, the percentage was 12 percent. (In 2011, it was 11.5 percent.) Unemployed workers are also taking longer to find new jobs.
Following on the heels of the “lost decade” report, these latest figures from Pew are not too encouraging when it comes to the financial stability of American households. Still, there are signs that the American consumer, who has long been the primary driver of the economy, is beginning to perk up.
As we reported earlier in the week, Americans say they are feeling more optimistic about the economy, particularly about their own personal financial outlook and local economies, according to a new Citi Economic Pulse survey. Most respondents said they felt more confident about the future than they did last year. Citi attributes that rosy outlook partly to the fact that last year, the global economy was facing a lot of uncertainty, with U.S. Treasury downgrades and European bank troubles. Now, while the unemployment is still just over 8 percent, it has at least come down from the 10 percent high of 2009.
How optimistic do you feel?