Less money to spend
From the Washington Post:
Recession’s pain reaching deep into the economic recovery–The buying power of Americans continues to be weaker than it was when the recession ended four years ago, underscoring the lasting damage wrought by the downturn, according to a report released Wednesday. Inflation-adjusted median household income has declined 4.4 percent, to $52,098, since June 2009, the official end of the recession, said the report by Sentier Research, an Annapolis data-analysis firm headed by two former Census Bureau officials. Although Americans’ average income has been recovering from its recent low point in August 2011, it remains 6.1 percent below where it stood when the country toppled into recession in December 2007. By Michael A. Fletcher
I have left this comment elsewhere, because there is widespread misreporting and misunderstanding of this report.
While the data is correct, the conclusion drawn by most of your readers probably is not. The Sentier paper does not show a decline in wages, salaries, earnings, compensation, or paychecks, because they did not measure for that (something i have confirmed with them directly). Those have stagnated for a decade, but actually rose during the recession, declined about 3% after, and have steadied or slightly risen in the last year, mainly due to the effects of $3+ gasoline flowing through the economy. I’ve written about it, but if you don’t want to believe me, how about this paper by the Economic Policy Institutue published just this past week: http://www.epi.org/publication/a-decade-of-flat-wages-the-key-barrier-to-shared-prosperity-and-a-rising-middle-class/
The Sentier data is taken from the Household Survey, which includes both retirees of all ages and the unemployed. The typical retiree takes a 50% haircut in income, and Boomers are retiring at the rate of 10,000 a day. According to the Sentier paper, the typical unemployed household has suffered a 17% loss of income, from nearly the median in 2009 to well beneath it now. In other words, about half of the households with unemployed fell from above the 2009 median income to below it. That, plus retirements, accounts for almost all of the reported differences between stagnant median wages and greatly declining household income. In short, it is another manifestation of the employment to population ratio.
Stagnant median wages, growing at a nominal 1.5% to 2% is still not good, but I think it puts the urgent frame on the crisis of continued high unemployment, and weaning this country off of over dependence on oil.