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

Recession’s pain reaching deep into the economic recovery

By Michael A. Fletcher,

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.

Overall, median income has declined by 7.2 percent since January 2000, the report said, offering fresh evidence of the deep economic stagnation the nation has suffered for more than a decade.

Median income, which economists view as a key marker for the well-being of the nation’s middle class, is lagging across education levels and racial groups, the report said. Analysts said the report also reflects the increasing economic polarization apparent inother data.

“Median income is affected by trends in inequality, and you are seeing that to the extent there has been income growth in the past decade, it has disproportionately gone to those at the top and very top,” said Gregory Acs, director of the Income and Benefits Policy Center at the Urban Institute, a research organization.

So far in the current recovery, median incomes are defying efforts by Americans to improve their workforce skills, according to the report, compiled by analyzing data from the Census Bureau’s monthly Current Population Survey. Income is down even though the number of households headed by people who report having a college degree is up sharply since the end of the recession, according to the report.

Between June 2009 and June 2013, the number of American households headed by people holding an associate degree rose 14.7 percent, while the number of those with bachelor’s degree went up 10.1 percent and the number with some college rose 4 percent.

Conversely, the number of homes headed by people who did not graduate from high school dropped 7.9 percent, and the number led by people with just a high school diploma has declined 1.2 percent since 2009, according to the report.

Analysts said those changes probably reflect two facts:

●Americans, particularly those without college degrees, have been slow to move out and establish households in the wake of the downturn.

●Many Americans are working to bolster their credentials to help them navigate a labor market that has seen a pronounced decline in well-paying “mid-skill” jobs.

Indeed, education pays in the labor market. Households headed by people who did not finish high school had their median income drop 6.9 percent over the past four years, to $24,448. For households headed by people with at least a bachelor’s degree, median income also declined by more than 6 percent. But their median income still was significantly higher, at $84,705, the report said.

“People are trying to build their human capital and improve their skills to compete in this tough labor market,” said Gordon W. Green, co-author of the report and a partner at Sentier.

The years since the recession have been particularly harsh for black households, which were hit hard by the downturn and saw their median income decline by 10.9 percent, to $33,519, since the start of the economic recovery. That finding is consistent with the tough labor market for African Americans, among whom there is an a 12.6 percent unemployment rate — far above the national rate of 7.4 percent.

Median income for Hispanic households is down to $40,979, a 4.5 percent decline since 2009. Meanwhile, white household median income dipped 3.6 percent to $58,000 since the end of the recession.

Incomes are down among all age groups except those older than 65, which largely reflects the sturdiness of Social Security and other retirement benefits. Households headed by people younger than 25 saw median income decline by 9.6 percent during the first four years of the recovery, a drop nearly matched among those ages 55 to 64, whose median income has fallen 7 percent to $58,432 since 2009.

The downward trajectory of median incomes in the wake of the recession adds to the stagnation in middle-class wages that has dogged workers for more than 10 years.

In past decades, incomes dipped during recessions only to quickly bounce back during recoveries. After the recession of the early 2000s, however, median incomes made a slow climb but never reached their previous peak before plummeting again when the 2007 downturn hit.

“It is not uncommon in a bad recession to see significant drops in median household income,” Acs said. “But what is a bit surprising here is how long it is taking to recover.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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