NEW YORK (MainStreet) — As bad as things were during the recession, household incomes actually declined at a faster pace in the years after it ended, one new study shows.
The median annual income for U.S. households before taxes dropped from $55,309 when the recession officially began in December 2007 to $53,518 in June 2009 – a 3.2% decline – according to data collected by two former Census Bureau officials in a report for Sentier Research. That decline came at a time of economic crisis when businesses nationwide laid off millions of workers and cut pay and hours for many more, but as bad as this income drop was, it’s nothing compared to what happened after the economy supposedly came out of the recession.
In the two years after the recession officially ended in June 2009, the median household income continued to plummet, dropping by more than $3,500 to $49,909. That represents a decline of 6.7% in the first two years of the recovery, more than twice the rate of decline experienced during the recession.
Other reports have pointed to a drop in personal income in the post-recession years, but none have painted such a dire picture of income levels during the recovery. The new data sheds more light on why some Americans feel as though the recession never really ended. Declining income makes it that much harder for households to pay down their debts, and leaves Americans with less money to spend. With less demand for products and services, businesses have less ability to hire new workers.
Indeed, the study’s findings are further proof that defining the beginning and end of recession by the nation’s total output, as measured by our gross domestic product, often fails to capture the fiscal reality of average Americans. As MainStreet has reported before, many economists believe it would be more accurate to place the emphasis on unemployment rates and income levels when gauging the overall health of the economy.
Going forward, Sentier Research is planning to do something similar by launching the Household Income Index, a monthly report tracking household income values in comparison to what they were at the beginning of last decade. As you can see in the chart above, those income values have plummeted while the unemployment rate has skyrocketed. In a very real sense, we are still living in an upside-down economy.
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