WASHINGTON – A new survey of U.S. family finances released by the Federal Reserve on Monday documents in painful detail just how deeply the recession and its aftermath has impacted family budgets across America.
The Survey of Consumer Finances, conducted every three years and covering a span from 2007 to 2010, documents steep declines in family income that correspond to what many Americans already know about their own declining net worth.
It also shows how the U.S. South and West have felt more pain than the rest of the country because of the severity of the housing sector’s downturn there, and provides evidence that the self-employed and business owners have taken it on the chin in recent years.
The Fed survey found that the median value of family income, when adjusted for inflation and before taxes, fell by 7.7 percent – from $49,600 in 2007 to $45,800 in 2010. The median is the midpoint of all family income, and while it fell in all four corners, it fell most in the South and West.
The Fed found that median net worth fell 38.9 percent – from $126,400 in 2007 to $77,300 in 2010. That essentially took net worth back to levels recorded in 1992, and reflects the steep erosion of housing wealth. Middle-class Americans have a greater proportion of net worth tied up in their home than do the rich.
The decline of incomes follows a period from 2000 to 2007 where incomes stayed flat from the end of the dot-com recession throughout recovery and until the December 2007 start of the Great Recession.
It marked the first time since the end of World War II that workers made almost no progress on wages throughout an entire business cycle, said Larry Mishel, president of the liberal think tank Economic Policy Institute.
“It’s why I think about it as a lost decade for families,” he said.
The average income, or mean income, for U.S. families fell even more dramatically, by 11.1 percent in the latest Fed survey period.
In a bit of good news, the Fed survey found that the debt burden on families eased somewhat from 2007 to 2010, aided by uncommonly low lending rates. The number of families with debt exceeding 40 percent of their income also fell slightly, although the number of families 60 days late on loans ticked up from 7.1 percent in 2007 to 10.8 percent in 2010.