Create your own title from the findings from latest Survey of Consumer Finances, a comprehensive review of household finances that the Federal Reserve conducts every three years dating to 1989. Title possibilities:
- The Catastrophic Effect of the Great Recession on the Middle Class
- Shrinking Middle Class Wealth
- The Clobbered Middle Class
- The Middle Class Took It in the Shorts
The Great Recession pummeled the middle class. American family median net worth fell by 38% between 2007 and 2010. In inflation adjusted dollars median net worth fell from $126,400 in 2007 to $77,300 in 2010, approximately the level recorded in 1992. Median income fell by 7.7%, making it the most severe decline in both metrics since the beginning of the survey in 1989.
Drilling down into the data we find the middle class absorbed the greatest blow to financial health. Families in the 60th to 79.9th percentile of income saw the biggest drop in wealth, of 40.4%. The second-steepest drop came from those in the 20th to 39.9th percentile of income, of 35%. The top 10% actually saw an increase of 1.8%.
A major factor accounting for the losses in the middle class is associated with middle class families having most of their wealth invested in their homes. As real estate values tumbled, middle class families were disproportionately hurt by the recession. Poor and rich families were more favorably insulated from the burst of the real estate bubble.
The top 10% of earners had a median net worth of $1.19 million, or 192 times as much as the median wealth of $6,200 of those in the bottom 20%. In 2007, the top 10% had 138 times as much wealth as the bottom 20%. In 2001, it was 106 times as much.
Retirement accounts took a hit as well. Families with retirement accounts fell 2.6 percentage points to 50.4%.
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Federal Reserve Bulletin. (2012). “Changes in U.S. Family Finances From 2007 to 2010: Evidence From the Survey of Consumer Finances,” Division of Research and Statistics. Vol 98, No 2.