The Great Recession socked Americans’ wealth across all regions, ages, and income brackets, but it took a particularly large bite out of Westerners, young people, senior citizens, and the wealthiest 10 percent of the country, according to exhaustive new statistics the Federal Reserve released on Thursday.
More than three in five Americans saw their wealth decline between 2007 and 2009, the Fed reported, based on its Survey of Consumer Finances. Plummeting housing and stock prices drove the losses.
The numbers do not show a fundamental shift in America’s wealth distribution in the wake of the financial crisis. Instead, they that show many of the rich got somewhat poorer -- at least on paper; many of the extremely poor got a little bit wealthier; and almost everyone else lost wealth but generally treaded water compared to their fellow Americans.
The survey asked detailed financial questions of a set of respondents, first in 2007 and again in 2009. It found the mean national family wealth fell from $595,000 in 2007 to $481,000 in 2009, while the median wealth dropped from $125,000 to $96,000. Real median household income dipped a touch, from $50,100 to $49,800 a year.
Wealth losses varied widely by region, largely reflecting differences in housing markets. In the West, which includes some of the most foreclosure-rocked metro areas in the country, median family wealth fell by nearly 30 percent. In the more stable Northeast, median family wealth fell by about 10 percent.
Households headed by someone younger than 35 or older than 74 suffered the largest median losses in wealth across age groups.
Most households barely moved within the nation’s broad distribution of wealth during the recession -- they didn’t get any richer or poorer than anyone else in that time. One exception was heavy borrowers: Families making regular debt payments larger than 40 percent of their income dropped a percentile in the wealth distribution more than twice as often as other families.
The results suggest that the recession made American families more cautious about borrowing and spending. That shift that could signal a sounder economic footing than in the precrash days of the housing bubble, but Fed researchers worry it could also hinder the emerging economic recovery by depressing consumer spending.
“The data show signs that families’ behavior may act in some ways as a brake on reviving the economy in the short run,” the researchers wrote, because families emerged from the crisis expressing a need to save more for emergencies and because they appear unlikely to increase consumer spending on pace with rising asset prices in the future.
This article appears in the March 24, 2011 edition of National Journal Daily PM Update.