Posted on 02/24/2006 6:24:09 AM PST by Sam's Army
WASHINGTON - After the booming 1990s when incomes and stock prices were soaring, this decade has been less of a thrill ride for most American families.
Average incomes after adjusting for inflation actually fell from 2001 to 2004, and the growth in net worth was the weakest in a decade, the Federal Reserve reported Thursday.
Many families were struggling in the aftermath of the 2001 recession and the bursting of the stock market bubble in 2000, the Fed's latest Survey of Consumer Finances showed. The comprehensive look at household balance sheets comes every three years.
Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 2.3 percent when compared with 2001.
That was the weakest showing since a decline of 11.3 percent from 1989 to 1992, a period that also covered a recession.
The average incomes had soared by 17.3 percent in the 1998-2001 period and 12.3 percent from 1995 to 1998 as the country enjoyed the longest economic expansion in history.
The median family income, the point where half the families made more and half made less, rose a tiny 1.6 percent to $43,200 in 2004 compared with 2001.
Economists said the weakness in the most recent period was understandable given the loss of 2.7 million jobs from early 2001 through August 2003, when the country was struggling with sizable layoffs caused by the recession, the terrorist attacks and corporate accounting scandals.
The weak income and the stock market decline in the early part of the decade, which wiped out $7 trillion of paper wealth, had an adverse impact on family balance sheets.
Net worth, the difference between assets and liabilities such as loans, rose by 6.3 percent in the 2001-04 period to an average of $448,200. That gain was far below the huge increases of 25.6 percent from 1995 to 1998 and 28.7 percent from 1998 to 2001, increases that were fueled by soaring stock prices.
The 2001-04 performance was the worst since net worth actually declined by 9.9 percent in the 1989-92 period.
The report showed that the slowdown in the accumulation of net worth would have been even more sizable except for the fact that homeowners have enjoyed big gains in the value of their homes in recent years.
The gap between the very wealthy and other income groups widened during the period.
The top 10 percent of households saw their net worth rise by 6.1 percent to an average of $3.11 million while the bottom 10 percent suffered a decline from a net worth in which their assets equaled their liabilities in 2001 to owing $1,400 more than their total assets in 2004.
"This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."
Democrats used the new report to blast President Bush's economic policies, contending it would be wrong to make permanent his tax cuts, which primarily benefit the wealthy.
"These statistics show why, even though GDP is rising, most people do not feel better off," said Sen. Charles Schumer, D-N.Y.
The Fed survey found that the percentage of Americans who owned stocks, either directly or through a mutual fund, fell by 3.3 percentage points to 48.6 percent in 2004, down from 51.9 percent in 2001.
Analysts said this was an indication that investors burned by plunging stock prices in the decade's early years have been leery about getting back into the market.
The share of Americans' financial assets invested in stocks dipped to 17.6 percent in 2004, down from 21.7 percent in 2001.
Reflecting the housing boom, the share of assets made up by home ownership rose to 50.3 percent in 2004, compared with 46.9 percent in 2001.
The Fed survey found that debts as a percent of total assets rose to 15 percent in 2004, up from 12.1 percent in 2001. Mortgages to finance home purchases were by far the biggest share of total debt at 75.2 percent in 2004, unchanged from the 2001 level.
There was concern that families might start to feel even more squeezed as the cost of financing their debts increases along with rising interest rates.
Although surging home values have supported consumer spending in recent years, analysts worry about the economic impact if, as expected, the home price surge begins to slow this year.
"This report shows a race between factors boosting net worth, such as home ownership, and factors pushing the other way, such as weak wage growth," said Jared Bernstein, senior economist at the liberal Economic Policy Institute, a Washington think tank.
Oh, the humanity!
I'm pretty sure this recession began in 2000, with Bill Clinton in office.
Don't let that fact get in the way of a little revisionism.
I would feel a great deal better if Sen. Schumer stopped whining and started working to make America stronger.
Meanwhile, Senator Schumer, did you know that nearly 70% of Americans own their own homes? This is not only a national record, but a WORLD record. I'd say this statistic is an extremely good indicator of a vibrant economy.
Putz.
It did. In the last ten months of the Clinton Presidency, the NASDAQ dropped 40%. That is not a good thing.
There has to be three straight Quartly declines, so it started in 2000 but wasn't official until 2001.
Economic troubles at the time were well known, yet Clinton was not blamed. Now, with the revisionism, the recession has moved forward to 2001, and President Bush gets the blame.
Gotta hand it to the Left. They got the tricks down pat.
bump
Right you are. That charge was complete and total baloney. Notice, please, that the MSM said nothing about Mr. Kerry's remarkably negative statements about the nation's economy during the 2004 presidential race.
I didn't read the article yet, but the idea that wealth creation is harmful to the poor and middle classes, or that putting a limit on wealth creation is helpful to them, is one of the classic deceptions of socialism.
ping
It's ALL my fault.If my wife and I hadn't decided she would stay home with kids,instead of continuing working,none of this would have happened.
Continuous attempts at class warfare from these nincompoops.
George W. Bush
You got it wrong. The extreme stratification of wealth HELPS socialism to win. Wide distribution of wealth PREVENTS victory of socialism.
The only way to preserve private ownership TOGETHER with extreme stratification is to suppress freedoms and dissent in Latin American style.
You are spot on. The left believes that the pie (total wealth) is fixed and that government should cut the slices of the pie (income redistribution) to be "fair." Remember Marx:
"To each according to their needs, from each according to their ability."
The truth is that Free Enterprise fosters individual wealth creation. Efficiency is rewarded when individuals spend their money. Government is not efficient when it spends other peoples money (taxpayers). Milton Friedman points out in his book "Freedom to Choose."
I'm not positive, but I think 2 quarters of negative growth qualify. 3 is also a recession, and 4 is a depression.
Wasn't because of me. Family income went up a real 5.4% in that time and a real 9.5% from 2001 to 2006. My net worth has gone from $25,000 to $300,000 in that time period (thanks to housing prices, my 401K and stocks rapdily increasing, cash savings enabled by tax cuts, and trading in my old car for a new one). Although my own income went up a real 47% from 1998 to 2001, that increase enabled my new bride to quit working and start our family, so her income went down a real 100% that ended up being equivalent to my raise. Its amazing how wealthy you get socking away $900 a month, and buying a house at the right time.
Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 2.3 percent when compared with 2001.
The median family income, the point where half the families made more and half made less, rose a tiny 1.6 percent to $43,200 in 2004 compared with 2001.
Interesting there is such a difference in the average and median.
Oh, if only we could return to the phoney accounting standards and the pre-popped stock market bubble.
We were a lot better off then!
(rollng eyes)
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