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Economic Inequality Continued To Rise In The U.S. After The Great Recession

In the three years following the end of the Great Recession, the typical American family’s income declined 5 percent, its wealth fell 2 percent, it saved no more for retirement, and it was saddled with even more student debt. The only households to see income gains were the highest earners, and the gap between the wealthiest and the poorest widened.

These are the dispiriting results from the Federal Reserve’s latest triennial report, the Survey of Consumer Finances (SCF), which was released on Thursday. The SCF is a massive enterprise, conducted by the Fed in conjunction with the U.S. Treasury Department. More than 6,000 families were interviewed in 2013, and their responses were weighted by demographic characteristics to get a realistic national picture.

There’s a ton of information in the report, and we’ll be digging into it in depth in the weeks and months ahead. But here are a few initial takeaways:

Many families didn’t enjoy much of a recovery. The recession officially ended more than five years ago, in June 2009, but polls routinely show that many Americans are deeply dissatisfied with the state of the economy. Thursday’s report helps explain why: For many families, the recession never ended. In 2013, the median (or typical) American family’s annual income was about $46,700. That’s down from $53,100 in 2007, before the recession began, and down from $49,000 in 2009, after it was officially over. (All figures have been adjusted for inflation.) In other words, median U.S. household income has fallen 5 percent during the recovery. The story is much the same for net worth, the value of a family’s assets (cash, stocks, retirement accounts, home equity) minus its debts (including mortgage debt). The median family’s net worth was $81,200 in 2013, down slightly from $82,800 in 2010 and down a whopping 40 percent from before the recession began. (Note: Income data are collected in 2013 but refer to the calendar year 2012. All other data in the report refers to 2013, when the data was collected. For clarity, we will refer to the date the survey was taken throughout this article.)

But some are doing better than others. Affluent Americans have seen their incomes rise modestly since the recession ended, though those incomes still aren’t all the way back to their 2007 levels. Everyone else, however, has lost ground. As a result, the earnings gap between the richest Americans and everyone else has widened. In 2010, the top 10 percent of earners made about 4.5 times as much as the median family; in 2013, they earned nearly five times as much. The same story holds in net worth: The top 3 percent of earners held 54.4 percent of all U.S. wealth in 2013, up from 51.8 percent in 2007 and 44.8 percent in 1989. One big reason for this is that richer Americans have benefited far more from the booming stock market. Top earners hold more than half of their assets in stocks, compared to less than a third for the poorest families. Less than half of all families own any stocks at all, even in retirement accounts.

Young people were hit especially hard. Thursday’s report provided yet more evidence that today’s young people risk becoming a “lost generation” economically. The median family headed by someone under 35 earned $35,300 in 2013, down 6 percent from 2010 and down nearly 20 percent from 2001. Those figures may understate the magnitude of the problem: Many young people are living with their parents because they can’t afford to strike out on their own; they aren’t included in the Fed’s figures because they don’t count as their own households. Young people have also become less likely to own their own homes (35.6 percent listed their primary residence as an asset in 2013, down from 40.6 percent in 2007) and much more likely to have student debt (41.7 percent in 2013, up from 33.8 percent in 2007). Whether by choice or by necessity, young people are also taking fewer financial risks, holding more of their assets in cash and less in stocks.

Housing is less of a source of wealth. The collapse of the housing bubble did lasting damage to Americans’ household finances. The percentage of American families who are homeowners declined, from 68.6 percent in 2007 to 65.2 percent in 2013. Those who do still own homes saw their value decline, to a median $170,000 from nearly $225,000 in 2007. And good luck using your home as a source of cash: Just 11.5 percent of families with a mortgage had access to a home equity line in 2013, down from 18.4 percent in 2007. (There was a similar decline in people refinancing their mortgages to take out cash.)

Debt levels are down, but debt troubles are up. Americans owe less than they did before the recession, in large part due to the surge in foreclosures, which wiped away trillions of dollars in debt. The median family owed 104.6 percent of a year’s income in debt in 2013, down from 124.7 percent in 2010. Low interest rates mean that debt payments — the actual amount paid each month — take up less of borrowers’ monthly paychecks than at any time in a generation. But the weak economy is still taking its toll: More than a quarter of Americans reported either being turned down for credit or deciding not to apply for fear of being turned down. The share of borrowers who are severely late on debt payments remains high, though down from its peak. And a record 4.2 percent of Americans reported taking out a payday loan in 2013.

Ben Casselman was a senior editor and the chief economics writer for FiveThirtyEight.

Andrew Flowers wrote about economics and sports for FiveThirtyEight.