With recoveries like this one, who needs recessions?
The average household income has fallen steadily for nearly everyone since the start of the economic expansion in June 2009, with average income dropping 4.8 percent in the three years since the upturn began, according to a report released Thursday.
High unemployment, outsourcing of jobs and generally slow economic growth have restrained income for households during one of the weakest and most prolonged recoveries on record, according to the report from Sentier Research.
Consumer surveys consistently show Americans pessimistic and unwilling to spend money. The Sentier monthly survey, which is based on real income adjusted for inflation, explains much about the gloominess many Americans feel about their finances. While there has been a slight upturn in recent months, the totals have slipped even further from recession levels.
Surprisingly, the one significant population to escape intact has been senior citizens, and the one region of the country whose income has remained steady has been the Midwest. Cost-of-living adjustments for Social Security helped the over-65 group, while the heartland states experienced gains in the industrial and farm economies.
But following the long-term trend, lower income and less-educated groups have been hit hardest by income declines. The West, hampered by California’s fiscal crises and the extremely weak housing markets, fared worst among regions.
Some of the key findings:
- Older Boomers and their grown children were hit disproportionally hard. (Those in the 55- to 64-year-old bracket saw income drop 9.7 percent; those 25 to 34 saw income decline 8.9 percent).
- Seniors were the only group posting gains, with the 65-74 bracket up 6.5 percent and 75 and older up 2.8 percent.
- Western states dropped the most of any region: down 8.5 percent. The Midwest income fell least, just 1.1 percent.
- Income for blacks fell 11.1 percent, twice the rate of whites’ 5.2 percent.
- Education mattered – but a high degree was no income guarantee. College-educated individuals lost 5.9 percent, while those with just a high school diploma holders dropped 6.9 percent.
The research firm, Sentier, which compiles figures on a monthly basis based on a sample of 50,000 people, does not make forecasts. But one of its researchers said that the figures do foreshadow a troubling trend.
“With income growth so restrained, we are worried about what happens if inflation picks up. It could have a big impact if gas prices continue to rise,” said Gordon Green, senior researcher for Sentier and a former Census Bureau statistician.
In an election year, the figures will be widely watched, Green noted, adding that “people will draw their own conclusions” about how the income data plays with voters. Mitt Romney already cited a previous Sentier report earlier this year, blaming the Obama administration for a falling living standard, although the Republican drew flack for overstating a key figure.
The report avoids the stickiest political issue of how wealthy have fared vs. the middle income and poor. It measures only the average median income and breaks it down by demographic and regional sectors -- not 1 percenters vs. the 99 percent.
But it does wade into the political realm for one issue that could resonate on Election Day in November. For the first time, the Sentier report breaks down the income performance of Red, Blue and ‘Purple’ swing states.
It reports that household income dropped 5.0 percent over the past three years in traditionally Republican red states, and by 5.2 percent in Democratic blue strongholds.
If it’s all about the economy, the Purple swing states have a bigger beef that Red or Blue about their financial status, since their collective income dropped by 5.7 percent. But the difference among the three is “statistically insignificant” over the three years, said Green.
To be fair, the relative decline of American income is decades, not presidential terms, in the making.
But watch for pundits on both to comb through the data for the debate to come. Even if it’s an economy that makes everyone look stupid, the raw data on declining income is red meat of the pit bulls of the campaign trail.