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September 29, 2006

But The Economy Is Really Good! Promise!

This ain't good news:

According to the study, less than a third of all American families have accumulated income equaling three months of their wages. The trend is particularly pronounced among the 60 percent income distribution that makes up the middle class: those with dual incomes earning from $18,500 to $88,030 a year.

From 2001 to 2004, the proportion of middle-class families that has saved three months' worth of income dropped to 18.3 percent from 28.8 percent, the study said.

Higher prices for a range of things -- including health care, energy, transportation, food and education -- have put Americans in this position as corporate profits have risen, the study said.

It said, that five years into the current economic recovery, average job growth is one-fifth that of previous business cycles and wages are flat when inflation is factored into the equation.

To maintain day-to-day consumption, families have taken on a record amount of debt, equal to 126.4 percent of disposable income in the first quarter of 2006, according to the study.

And that's coming at the same moment that income volatility -- the likelihood of massive, negative shocks to your income -- is way, way up. So not only are American families more likely to lose their jobs and salaries, but they're less likely to have the savings to endure the downturn. Yikes.

September 29, 2006 | Permalink

Comments

Does anyone know whether "accumulated income" here includes 401-(k)s and IRAs?

Posted by: SamChevre | Sep 29, 2006 1:27:26 PM

No, but bear in mind that IRA's and 401(k)'s are no different than regular savings accounts other than a different method of taxation.

Posted by: Fred Jones | Sep 29, 2006 1:30:45 PM

average job growth is one-fifth that of previous business cycles

What was the highest unemployment rate in those cycles as compared to this one?

income volatility -- the likelihood of massive, negative shocks to your income -- is way, way up

Way, way up? To what?

I agree that the economy has problems, and isn't as good as it would be if we had proper policies, but I don't see "the downturn" yet. Where is it?

Posted by: Sanpete | Sep 29, 2006 3:39:25 PM

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