A Long, Steep Drop for Americans' Standard of Living

[WestVirginiaRebel]

Christian Science Monitor:

Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and "Occupy Wall Street" and who may take out their frustrations on incumbent politicians in next year's election.

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth – think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people's buying power by 3.25 percent since mid-2008.

"In a dynamic economy, one would expect Americans' disposable income to be growing, but it has flattened out at a low level," says economist Bob Brusca of Fact & Opinion Economics in New York.

To be sure, the recession has hit unevenly, with lower-skilled and less-educated Americans feeling the pinch the most, says Mark Zandi, chief economist for Moody's Economy.com based in West Chester, Pa. Many found their jobs gone for good as companies moved production offshore or bought equipment that replaced manpower.

"The pace of change has been incredibly rapid and incredibly tough on the less educated," says Mr. Zandi, who calls this period the most difficult for American households since the 1930s. "If you don't have the education and you don't have the right skills, then you are getting creamed."
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Certainly if you don't work on a government payroll, you're getting creamed...