Obama Said “The Private Sector Is Doing Fine” Yet The Average American’s Net Worth Has Dropped 40 Percent! Washington Post.
Mon, 06.11.12 7:07pm EST
THE WASHINGTON POST. JUNE 11, 2011 5:04PM
Fed: Americans’ wealth dropped 40 percent By Ylan Q. Mui,
Is the U.S. economic recovery stalling?: The Labor Department reported June 1 that the nation’s economy added only 69,000 jobs in May, bringing the unemployment rate to 8.2 percent. Here, a look at the fallout from our troubled economy and the troubles of economies overseas. The Great Recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.
The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.
10 industries that are dying: According to an April report from IBIS World, these industries are losing ground as outsourcing, global competition and technological innovation render them less useful or necessary.
On Recession Road: Photocasting across America with Michael S. Williamson: A Washington Post photojournalist has spent the year traveling around the country, meeting people whose lives have been altered by the flattened economy. The biggest drops occurred among middle-income Americans, whose wealth was inextricably linked to the housing market boom and bust. Meanwhile, the wealthiest families actually saw their median income rise slightly. The data represents one of the most detailed looks so far how Americans’ finances have weathered the economic downturn. It underscores both the depth of the wounds of the financial crisis and how far many families remain from healing.“It’s hard to overstate how serious the collapse in the economy was,” said Mark Zandi, chief economist for Moody’s Analytics. “We were in freefall.”
The survey, conducted every three years, painted a portrait of consumers still under significant duress: Though Americans made progress in paying off their credit cards, the median value of family debt did not change between 2007 and 2010. The percentage of families saddled with debt greater than 40 percent of their income also stayed the same. More families reported being behind on their bills. The implosion of the housing market inflicted much of the pain. The value of Americans’ stake in their homes fell by 42 percent in those three years to just $55,000. The poorest families suffered the biggest loss of wealth from the drop in real estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just over half of their assets. That means every step downward is felt more acutely.
Rakesh Kochhar, an economist at the Pew Research Center, calls this phenomenon the ”reverse wealth effect.” As consumers watched the value of their homes rise during the boom, they felt more confident in spending more money even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper. According to the Fed survey, that paper wealth — or what is officially called unrealized capital gains — shrunk 11 percent to about a quarter of American’s assets. The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record high disparities in wealth between whites and blacks and Hispanics. “It was turning the clock back quite a bit,” Kochhar said.