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.