U.S. income slides 6.7% since 2009

Decline more than double 3.2% drop during recession

10/10/2011

WASHINGTON -- Household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.

Between June, 2009, when the recession officially ended, and June, 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials.

During the recession -- from December, 2007, to June, 2009 -- household income fell 3.2 percent.

The finding helps explain why Americans' attitudes toward the economy, the country's direction, and its political leaders have continued to sour even as the economy has been growing.

Unhappiness and anger have come to dominate the political scene, including the early stages of the 2012 presidential campaign.

The full 9.8 percent drop in income from the start of the recession to this June -- the most recent month in the study -- appears to be the largest in several decades, according to other Census Bureau data.

Gordon Green, Jr., who wrote the report with John F. Coder, called the decline "a significant reduction in the American standard of living."

That reduction occurred even though the unemployment rate fell slightly, to 9.2 percent in June compared with 9.5 percent two years earlier.

Two main forces appear to have held down pay: the number of people outside the labor force -- neither working nor looking for work -- has risen, and the pay of employed people has failed to keep pace with inflation, as the prices of oil products and many foods have jumped.

During the recession itself, by contrast, wage gains outpaced inflation.

One reason pay has stagnated is that many people who lost their jobs in the recession -- and remained out of work for months -- have taken pay cuts in order to be hired again.

In a separate study, Henry Farber, an economics professor at Princeton, found that people who lost jobs in the recession and later found work again made an average of 17.5 percent less than they had in their old jobs.

"As a labor economist, I do not think the recession has ended," Mr. Farber said. "Job losers are having more trouble than ever before finding full-time jobs."

This downturn was "fundamentally different" from most previous ones, he said.

Historically, other economists say, financial crises and debt-caused bubbles have led to deeper downturns.

Mr. Green and Mr. Coder said the persistently high rate of unemployment and the long duration of unemployment helped explain the decline in income during the recovery.

In the recession, the average length of time a person who lost a job was unemployed increased to 24.1 weeks in June, 2009, from 16.6 weeks in December, 2007, according to the federal Bureau of Labor Statistics.

Since the end of the recession, that figure has continued to increase, reaching 40.5 weeks in September, the longest in more than 60 years.

The new study by Mr. Green and Mr. Coder is based on monthly census surveys, rather than the annual data that appeared in last month's census report on income.

The monthly figures allow researchers to measure income changes more precisely during a recession or a recovery and provide more current information.

In their study, Mr. Green and Mr. Coder found that income dropped more, in percentage terms, for some groups already making less, a factor that may have contributed to rising income inequality.

From June, 2007, to June of this year, they said, median annual household income declined by 7.8 percent for non-Hispanic whites, to $56,320, and by 6.8 percent for Hispanics, to $39,901. For blacks, household income declined 9.2 percent, to $31,784.

Mr. Green and Mr. Coder, who both worked at the Census Bureau for more than 25 years, found other income changes over the four-year period.

For example, income, after adjustment for inflation, declined fairly substantially for households headed by people under age 62, but it rose 4.7 percent for those headed by people 65 to 74, many of whom are not in the labor force.

The change was negligible for those 62 to 64.

The type of employment also made a difference.

Real median annual income declined to a similar degree for households headed by private-sector wage workers (4.3 percent) and government-sector workers (3.9 percent), but fell much more for the self-employed (12.3 percent).

Men living alone showed a bigger decline than women living alone. Education levels also were a factor.

For households headed by people who had not completed high school, median income declined by 7.9 percent, to $25,157. For those with a bachelor's degree or more, income declined by 6.8 percent, to $82,846.