Average American Family Grew 2.3% Lazier Between 2001 and 2004

Meanwhile, the top 1% was apparently working harder than ever!

Average family income drops 2.3%

By Sue Kirchhoff, USA TODAY

The 2001 recession was shallow, but its effects were steep.

Average family incomes fell in the USA from 2001 to 2004, pulled down by a sluggish recovery from the downturn and the sharp stock market drop, the Federal Reserve said Thursday. The decline — the first since 1989-92 — was accompanied by the smallest increase in net worth in that period.

In its comprehensive Survey of Consumer Finances, released every three years, the Fed said the median net worth of the bottom 40% of families declined, while those at the top saw gains. The percentage of families investing in stocks fell 3.3 percentage points to 48.6% from 2001 to 2004, a level last reached some time between the 1995 and 1998 surveys.

Mark Zandi, chief economist of Moody's Economy.com, says job growth and incomes have been picking up since the survey period. But the report provides more troubling evidence of a rising gap in wealth in the USA.

"The household balance sheet is in good shape, better shape today ... but it's not improved for everybody. It's improved for the people in the top distribution of income and wealth," he says.
From 2001 to 2004, average family income fell 2.3%, to an inflation-adjusted $70,700 from $72,400 in the 1998-2001 period. By contrast, from 1998 to 2001, average income jumped 17.3%. Median income — the midpoint of the income range — rose 1.6% to $43,200.

Fed economists said the figures were "strongly influenced" by a more-than-6% drop in median real wages during the period. Also, investment income was less than in the stock market boom years of the late 1990s. (Related: Full report)

Real net worth — the difference between family assets and liabilities — rose only slightly from 2001 to 2004. Median net worth rose only 1.5% to $93,100 during the period, vs. a 10.3% gain from 1998 to 2001. And liabilities rose faster than assets, due largely to a big rise in mortgage debt.

Though the economy was in recession in 2001, it steadily improved from 2002 to 2004 with low inflation and falling unemployment.

There was some good news in the report. Minorities, who have long lagged behind whites in income, saw healthier gains. Homeownership rates rose. Still, minority income remains much lower, about 60% of whites.

"The measured gains in wealth in the 2001-04 period pale in comparison with the increases of the preceding three years," wrote Fed economists Brian Bucks, Arthur Kennickell and Kevin Moore.