The Federal Reserve's triennial Survey of Consumer Finances released Monday found that the Great Recession cut the median family's net worth in inflation-adjusted dollars from $126,400 in 2007 to $77,300 in 2010, a 40 percent drop. Median family income was $45,800 in 2010, a drop of nearly 8 percent from $49,600 in 2007. While the numbers are already 18 months old, they show just how deeply the damage from the economic downturn was.
Net worth has begun recovering more recently. The Fed reported separately last week that median household net worth as of the first quarter of 2012 was 28 percent below its level at the start of the recession in 2007. Fox & Friends inaccurately tried to tie the 40 percent drop to the Obama administration.
The survey covers a lot of ground, including disparities among different groups of Americans:
Families with incomes in the middle 60 percent of the population lost a larger share of their wealth over the three-year period than the wealthiest and poorest families.Those are anything but dry statistics. Americans have been living them for several years now. While the economy has improved marginally thanks to government spending and low-interest rates—allowing some people to dig themselves out of debt—housing prices, which were the main drivers of the rise in median net worth in the six years before the recession began, have not recovered.
One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.
Those middle-income families also lost a larger share of their income. The earnings of the median family in the bottom 20 percent of the income distribution actually increased from 2007 to 2010, in part because of the expansion of government aid programs during the recession. Wealthier families, which derive more income from investments, were also cushioned against the recession.
The Fed's survey is filled with data showing how broad the impact of the recession was. But there were sharp differences between categories based on relative affluence.
From 2007 to 2010, the median for those households in the bottom quarter of net worth fell from $1,300 to zero. That's a 100 percent drop. The mean for that group went from a net worth of minus $2,300 to negative $12,800.
By comparison, the median and mean plunges in net worth were not so great for Americans in the 50th-to-75th percentile group, but still large. Median net worth for that group fell 43.3 percent. For the 75th-to-90th percentile group, on the other hand, median and mean net worth fell only 19.7 percent and 14.4 percent, respectively.
For the top 10 percent of the population, the median net worth fell 6.4 percent and the mean fell 11 percent.
Given that housing makes up a greater percentage of net worth for lower-income families who own their own homes than for upper-income families whose wealth is more a factor of their investments, the rise in the stock market since 2010 while housing prices continued falling has no doubt increased the relative distance between Americans in the lower and higher percentiles.
Given the sluggishness of the growth in jobs, without additional policy changes, including more government spending, that distance will increase even more.
The impact of the statistics found in the Fed's survey can be seen in a broad range of circumstances and attitudes affected by the current state of the economy. For instance, in a survey conducted in 2012 by the Employment Benefit Research Institute, 37 percent of workers said they expect to delay their retirement beyond age 65. In 1991, only 11 percent expected to do so. In 2007, 41 percent of those surveyed said they felt sure they would have enough savings and investments for retirement. In 2012, only 21 percent said so.