Household Income Report Clears Away the Economic Gloom….With DOOM!

Americans are not just getting poorer and broker. We're also earning more than 7 percent less than we were during the worst part of the recession, according to a report from two former U.S. Census Bureau officials

"[R]eal median annual household income, while recovering somewhat during late 2011 and the first half of 2012, has fallen by 4.8 percent since the 'economic recovery' began in June 2009," says the report [pdf] from Sentier Research, an analytical company founded by former U.S. Census Bureau officials Gordon Green and John Coder.  "The overall decline since June 2009 was larger than the 2.6 percent decline that occurred during the officially defined recession lasting from December 2007 to June 2009.  Adding this post-recession decline to the 2.6-percent drop that occurred during the recession leaves median household income 7.2 percent below the December 2007 level."

This is early confirmation of my column in the October issue of Reason, "Worse Than the Recession." It's not online yet, but here's a sample: 

Against this slow (and sometimes fast) dribbling away of wealth, we are supposed to believe the economy is improving because U-3 unemployment is "holding steady" at more than 8 percent, or because of a small spike in real estate settlements. 

Don’t believe it for a minute. It’s a step in the right direction that lenders have finally increased the pace of foreclosures (according to RealtyTrac, foreclosures jumped 6 percent in the first quarter), but it will take many years to work through the backlog of distressed mortgages. The percentage of Americans even looking for jobs, let alone holding them, continues to fall, and the 80,000-a-month rate of private-sector job creation doesn’t come close to keeping up with population growth. 

That the recovery is more painful than the recession (and over a longer time duration, a point many people don't take into consideration) is something I've discussed before

The Sentier report quantifies the decay brought on by Keynesian recovery in terms that only seem quaint: How much people are making, how much they're saving, and how much they have. "Less" is the short answer to all of those. 

"This latest report continues our efforts to help chronicle one important dimension of the economic hardships now being experienced by a large number of American households," Green explains. "Our data complement data on the unemployment rate, GDP estimates, leading economic indictors, etc.  In many ways, median household income provides a measure of the net effect of economic activity on the middle class and how well they are able to buy food, housing, and other necessities every month, especially now during this unprecedented period of economic stagnation. Based on our data, almost every group is worse off now than it was three years ago, with the exception of households with householders 65 years old and over. For some groups of households—Blacks, men living alone, younger and upper-middle age brackets, those with some college but no degree, the unemployed, the self-employed, and those living in the West—the declines tended to be larger than average."

So why is the drumbeat of the housing-led recovery getting louder? I think this may be another case where traditional economic wisdom about leading and lagging indicators turns out to be a bunch of baloney. Unless somebody can explain how a spike in real estate closings is going to be sustainable, given near-daily bad news about earning power and wealth formation, I say we're going to be looking at another "unexpected" decline in housing data before the year's out. 

Consumption be done about it? Of cough, of cough: The government has decided that people are too likely to use their savings and support from family members in tough times. "Given that only 15 percent of you turn to government assistance in tough times, we want to make sure you know about benefits that could help you," USA.gov announced yesterday in unveiling its new "government made easy" website designed to give us all “help for difficult financial times.” 

Related: It turns out China's full of deadbeats too.

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  • Bill||

    More than 7 percent less? Really, Tim?

  • Mike M.||

    Absolutely incredible. Our demented government thinks that the problem is that there aren't Americans on welfare! You can't make shit like this up.

  • ShagNasty||

    Can't you see? The solution to our ecenomic woes is for a beaurocracy to take money from Americans, take a cut for themselves, and give the money back to Americans. See? Free money!

  • -Umbriel-||

    The government's marketing of its handouts is all the more egregious for the loosening of its eligibility criteria -- a person (particularly a retiree) can be sitting on a pretty big pile of accumulated wealth, but if their nominal income is low, there's a long list of benefits and subsidies they can get, no fraud required.

  • R C Dean||

    Here's what I think has people confused:

    An ordinary business cycle recession involves, basically, a little creative destruction, as overbuilt sectors get pared back prefatory to capital getting reallocated into a nice recovery.

    This recession, though, has a deflationary/deleveraging component to it. The private sector is trying to delever (althought the government is trying to offset private deleveraging with more government debt). Capital is getting diverted to deleveraging, rather than to the next recovery, and deleveraging is deflationary and contractionary (that "demand destruction" that is so controversial in these parts).

    The usual creative destruction cycle has run into a deflationary undertow. Made worse because the recession whacks state and local tax receipts, forcing them to cut back and contract (thus, Obama's comment on "the private sector is doing fine"), which is also a contraction that shouldn't really matter except the government has gotten so fucking big. Government has grown to the size where it is actually deepening and extending ordinary business downcycles.

  • Alice Bowie||

    Bye Bye Obama and don't the the door hit u in the ass on the way out.

    I'm voting for Gary Johnson...which means I'm not voting for Obama...which is, effectively, a vote for Mitt Romney.

  • OldMexican||

    Re: Alice Bowie,

    I'm voting for Gary Johnson...which means I'm not voting for Obama...which is, effectively, a vote for Mitt Romney.


    How can you sleep at night??? *sniff* *sniff*!

  • Alice Bowie||

    Believe u me old mexican, the Pinco/Progressive flag is flying at half-staff on my property.

    I actually feel that Gary Johnson is more progressive than Obama. I'm doing my part and voting for Johnson. However, it makes me real sad that this is effectively a vote for an asshole called Romney which i think will be much much worse than obama.

  • Bean Counter||

    OK..A vote for Gary Johnson is a vote for a candidate that has no possible chance of winning. Thus, it is the same as not voting, from the point of view of who will become POTUS in 2013. If you are saying that if you didn't vote for Johnson, you would vote for Obama, then is accurate to say you are denying Obama a vote. Denying Obama a vote is not the same as voting for Romney. It's like saying a cancelled game is the same as a win. IOW, You don't vote for Obama: Romney and Obama have the same number of votes each as if you stayed home. You vote for Romney: Obama is the same as if you stayed home, but Romney has one more vote. Thus, the only way to vote for Romney is to....wait for it.....VOTE FOR ROMNEY! And, Yes, I will be voting for Romney with my fingers in a vise-like grip over my nose....pretty much the same way I've voted since 1972.

  • Bean Counter||

    DAMN - "it's accurate"

  • Heroic Mulatto||

    "Given that only 15 percent of you turn to government assistance in tough times, we want to make sure you know about benefits that could help you,"

    Ain't no love like a pimp's love.

  • Romulus Augustus||

    15% only makes sense if its "turn in tough times." There's probably another 25%-30% that gets govt assistance no matter how good or bad the times! Plus another 25% who don't get assistance but
    fervently believe in taking other peoples' money to assist those believed to be in need. Add it up and see why Obama is still odds on to win in November.

  • Pro Libertate||

    I think that even those on the receiving end of government largess have a faint understanding that the goodies can't flow without a decent economy. Obama's economic record is lousy, and everyone not trying to get him elected knows it.

    One advantage Romney has is that he really isn't very scary to the left. Rhetoric aside. I think it will be easy for many of their more moderate and economically concerned members to vote for him.

  • Loki||

    I think that even those on the receiving end of government largess have a faint understanding that the goodies can't flow without a decent economy.

    HAHAHAHAHA!!!! Good one! If this is sarcasm, well played. If not, you have far more faith in the economic literacy of the average dolt than I do.

  • Pro Libertate||

    Actually, I meant to say "some" and totally didn't mean to imply that "most" understood that.

  • Loki||

    Based on our data, almost every group is worse off now than it was three years ago, with the exception of households with householders 65 years old and over.

    Hmmm, I wonder why that would be? It's almost like the income of younger workers are being magically tranferred to the old farts.

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