news.yahoo.com/s/ap/20060223/ap_on_bi_ge/family_finances
AP Average American Family Income Declines By MARTIN CRUTSINGER, AP Economics Writer 1 hour, 18 minutes ago WASHINGTON - After the booming 1990s when incomes and stock prices were soaring, this decade has been less of a thrill ride for most American families.
Many families were struggling in the aftermath of the 2001 recession and the bursting of the stock market bubble in 2000, the Fed's latest "Survey of Consumer Finances" showed. The comprehensive look at household balance sheets comes every three years. Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 23 percent when compared with 2001. The median family income, the point where half the families made more and half made less, rose a tiny 16 percent to $43,200 in 2004 compared with 2001. Economists said the weakness in the most recent period was understandable given the loss of 27 million jobs from early 2001 through August of 2003, when the country was struggling with sizable layoffs caused by the recession, the terrorist attacks and corporate accounting scandals. The weak income and the stock market decline in the early part of the decade, which wiped out $7 trillion of paper wealth, had an adverse impact on family balance sheets. Net worth, the difference between assets and liabilities such as loans, rose by 63 percent in the 2001-2004 period to an average of $448,200, after adjusting for inflation. The 2001-2004 performance was the worst since net worth actually declined by 99 percent in the 1989-1992 period. The median family net worth, the point where half the families owned more and half owned less, stood at $93,100 in 2004, a rise of 15 percent after adjusting for inflation from 2001. The report showed that the slowdown in the accumulation of net worth would have been even more sizable except for the fact that homeowners have enjoyed big gains in the value of their homes in recent years. The gap between the very wealthy and other income groups widened during the period. "This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."
Analysts said this was an indication that investors burned by plunging stock prices in the decade's early years have been leery about getting back into the market. There was concern that families may start to feel even more squeezed as the cost of financing their debts increases along with rising interest rates. While surging home values have supported consumer spending in recent years, analysts worry about the economic impact if, as expected, the home price surge begins to slow this year. "This report shows a race between factors boosting net worth such as home ownership and factors pushing the other way such as weak wage growth," said Jared Bernstein, senior economist at the liberal Economic Policy Institute, a Washington think tank. "Unless we start to see better income growth from jobs and wages, it is hard to see major gains in net worth for the typical family."
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