On top of high unemployment, we're suffering from a drop in wages in the aftermath of the recession.
This week's credit check: Wage growth fell from 3.8% in May 2007 to 1.8% in May 2011. Wage growth over the past decade was below Great Depression levels.
It was a year ago this week that Treasury Secretary Tim Geithner welcomed America to its recovery. "We suffered a terrible blow, but we are coming back," he assured us, and he had a lot of "good news to report": businesses in a "strong financial position," banks "strong and more competitive," and American families saving more. But that last point may tell a slightly different story. While corporations are seeing nice profits again and banks are back to their usual wheeling and dealing, Americans are still scrimping and saving, even a year later. This recovery period hasn't felt like a recovery for the average worker, who is still struggling desperately to make ends meet. And beyond the fact that this is clearly a jobless recovery, another reason all of us are still wounded from the crash is that this is also a wageless recovery.
An analysis from the Economic Policy Institute shows that we're not just suffering from high unemployment in the aftermath of the recession. We're also experiencing falling pay for those who are lucky enough to have work. It reports that "wage growth has tumbled in the recession and its aftermath, falling from an annual growth rate of 3.8% in May 2007 to a rate of 1.8% in May 2011." Even the employed are worse off, bringing in less pay for their work.
And wages were pathetic even before the crash. While there are many parallels between our era and the Great Depression, that time period beats us in wage growth. As Jed Graham puts it, "Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939, government data show." So as wages fall after the Great Recession, they come on top of the fact that we had less to begin with heading into the financial crisis than people living under Hoover.
Fittingly, then, income is also falling during the "recovery." Total income was down about 15% between 2007 and 2009. New tax data that came out yesterday showed that in 2009, average income fell 6.1% to $54,283, losing $3,516 since 2008. That's the lowest level since 1997.
All of this comes on top of the trillions in wealth Americans lost in the crash -- little of which has been recouped. According to figures from the Federal Reserve, US household wealth fell by about $16.4 trillion of net worth from just before the recession to the worst of it in the beginning of 2009. Since then, Americans have regained only a little more than half of that, or $8.7 trillion. That stands in contrast to GDP, which has regained all of its losses. The picture is far, far bleaker for people of color. According to Census Bureau data, the median wealth for Hispanic households fell by 66% from 2005 to 2009 and by 53% for African Americans.
If wages continue to stall and unemployment remains outrageously high, we'll likely stay in this weak "recovery." When asked what's holding back the US economy, Deutsche Bank economist Carl Riccadonna responded, "It's the weakness in consumer spending." Workers spending their hard-earned paychecks (aka consumer spending) accounts for 70% of our economy.
As millions continue to look for work and employed workers bring less home, Americans should be able to turn to a government increasing job growth and promoting wages. But with unionization down and the government fixated on austerity, few are championing the needs of workers. Where will they turn instead when in need of cash to pay for the basics? Credit card companies, who will be glad to lend them money for outrageous fees and interest rates.
Bryce Covert is Assistant Editor at New Deal 2.0.