You didn't need the Federal Reserve for this news flash: Americans are poorer as a result of the financial crisis. The central bank's survey of 4,000 households occurred between 2007-2009 and found that 63 percent of Americans experienced a decline in total wealth in that period. How much? A staggering median 45 percent decline, due primarily to the falling values of homes and investment/retirement accounts.
Although the majority of Americans lost wealth, those at the bottom lost less than the wealthiest. Yes, you read that correctly--the bottom did better than the top. About 77 percent of the richest families suffered declines and the figure was about 50 percent for those with the smallest wealth.
Still, 50 percent is a pretty big number when you don't have a lot to your name. Who would you rather be: Ms. Lower End, whose net worth dropped from $100,000 to $50,000 or Ms. High End, whose net worth dropped from 1,000,000 to $230,000? More proof of my grandfather's old chestnut, "rich or poor, I'd rather have money!"
MoneyWatch blogger Mark Thoma has written about income disparity in the US and notes that "fully two-thirds of the income gains in the last economic expansion (2001-2007) flowed to just the top 1 percent," so it stands to reason that the folks at the top, were going to lose the most when the melt-down occurred.
Here are some of the stats from the Fed's Survey:
- Median Family Wealth: DOWN to $96,000 in 2009 from $125,000 in 2007
- Median household holding of stocks/mutual stock funds (for families with any of these holdings): -31 percent
- Median total debt: UP to $75,600 in 2009 from $70,300 in 2007
- Median income: DOWN from $50,100 in 2009 to $49,800 in 2007
- Median income for bottom 25 percent of earners: DOWN 5 percent
- Median income for top 10 percent of earners: DOWN 13 percent
- S&P 500 Dec 2007 - June 2009: -57 percent
- Home values Dec 2007 - June 2009 (S&P/Case Shiller): -32 percent
But have spending habits changed that much? According to this morning's final release of fourth-quarter GDP, consumer spending rose by 4 percent, which is the highest level since before the recession began. And remember those rich folks who took it on the chin? Don't feel too bad--they've made further gains since the end of the survey period and as a result, have picked up their spending quite a bit, especially when it comes to luxury items.
Image by Flickr User by RambergMediaImages, CC 2.0