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Recession has nearly cut Americans’ net worth in half

The long awaited Federal Reserve report reveals that the net worth of the American home has fallen by 40 percent in the last three years.

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Net worth slipping away

According to the long awaited Federal Reserve Survey of Consumer Finance, the recession has, in fact, hurt American families. The median family net worth plummeted 40 percent from $126,400 in 2007 to only $77,300 in 2010, the last year of the study. The report, released every three years also reveals that the median family income dropped 7.7 percent from $49,600 in 2007 to $45,800 in 2010. Brutal.

Families considered to be middle class were hit the hardest, with those in the 60th to 80th percentile seeing a 40.4 percent drop in net worth – from $215,700 all the way down to $128,600, and families in the 20th to 40th percentile saw a 35.4 percent drop in net worth from $39,600 to a staggering $25,600.

As of 2010, single people over the age of 55 had their net worth drop to nearly 2001 levels, while couples with children were the hardest hit family type, seeing a 41.2 percent drop in median net worth over the three years.

The survey results were expected to be bad, but the final results were staggering, with most Americans’ net worths falling as their property values plummeted during “The Great Recession” as the Fed is calling the economic crisis that some argue is not yet over.

[ba-quote]The survey says, “Families’ finances are affected by both their own decisions and the state of the broader economy. Over the 2007–10 period, the U.S. economy experienced its most substantial downturn since the Great Depression. Real gross domestic product (GDP) fell nearly 5.1 percent between the third quarter of 2007 and the second quarter of 2009, the official period of recession as determined by the National Bureau of Economic Research. During the same period, the unemployment rate rose from 5.0 percent to 9.5 percent, the highest level since 1983. Recovery from the so-called Great Recession has also been particularly slow; real GDP did not return to pre-recession levels until the third quarter of 2011. The unemployment rate continued to rise through the third quarter of 2009 and remained over 9.4 percent during 2010. The rate of inflation, as measured by the consumer price index for all urban consumers (CPI-U-RS), decreased somewhat over the period from an annual average of 2.8 percent in 2007 to 1.6 percent in 2010.[/ba-quote]

Net worth is down, yet spending is up?

Some have already interpreted the report as Americans’ belts loosening and a willingness to spend coming back, but the Federal Reserve survey says, “The share of families with any type of debt decreased 2.1 percentage points to 74.9 percent over the 2007–10 period, reversing an increase that had taken place since 2001.”

Outstanding credit card balances fell 0.6 percent over the three year period, and the survey does reveal spending, but more so to pay down debt than going out on shopping sprees and letting cash flow freely. Also noted in the report is the type of debts carried having shifted. Families with credit card debt declined by 6.7 percent to 39.4 percent, and the median balance of credit card debt fell to $2,600, representing a 16.1 percent decline during the survey period.

The number of credit cards carried by American families fell, with 32 percent saying in 2010 that they now had no credit cards, up five percent in the three years studied.

The middle class has most clearly been at the brunt of The Great Recession’s brutal blow, with all fingers pointing back to the housing market and the homeowners’ plight of continually falling home values. During this election year, it is not expected that any meaningful legislation on housing will pass, but in 2013, it will be interesting to see how statistics like the Fed’s new report play out on the national stage.

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5 Comments

5 Comments

  1. David Pylyp

    June 11, 2012 at 11:02 pm

    Corporate greed and fraud has cut net worth in half, and then we bailed them out….

  2. ThomasABJohnson

    June 11, 2012 at 11:40 pm

    The private sector is doing just fine losing half it’s net worth according to the President.

  3. The Heddings Property Group, LLC

    June 12, 2012 at 11:41 am

    Just crazy.

  4. Stephanie L Davis

    June 12, 2012 at 12:43 pm

    So sad.

  5. Pakistan Real Estate

    July 6, 2012 at 3:30 am

    Recession has paralyzed every single business across the world. Unemployment and downsizing has affected the working class of US. This is also a big reason that has shaken the net worth of US.

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Economic News

Boomers retirement may be the true reason behind the labor shortage

(ECONOMY) Millennials and Gen Z were quick to be blamed for the labor shortage, citing lazy work ethic- the cause could actually be Boomers retirement.

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Older man pictured in cafe with laptop nearby representing boomers retirement.

In July, we reported on the Great Resignation. With record numbers of resignations, there’s a huge labor shortage in the United States. Although there were many speculations about the reasons why, from “lazy” millennials to the number of deaths from Covid. Just recently, CNN reported that in November another 3.6 million Americans left the labor force. It’s been suggested that the younger generations don’t want to work but retiring Boomers might be the bigger culprit.

Why Boomers are leaving the labor force

CNN Business reports that 90% of the Americans who left the workplace were over 55 years old. It’s now being suggested that many of the people who have left the labor force since the beginning of the pandemic were older Americans, not Millennials or Gen Z, as we originally thought. Here are the reasons why:

  • Boomers are more concerned about catching COVID-19 than their younger counterparts, so they aren’t returning to work. Boomers are less willing to risk their health.
  • The robust real estate market has benefitted Boomers, who have more equity in their homes. Boomers have more options on the table than just returning to work.
  • Employers aren’t creating or posting jobs that lure people out of retirement or those near retirement age.

As Boomers retire, how does this impact the overall labor economy?

According to CNN Business, there are signs that the labor shortage is abating. Employers are starting to see record number of applicants to most posted jobs. FedEx, for example, just got 111,000 applications in one week, the highest it has ever recorded. The U.S. Bureau of Labor Statistics projects that the pandemic-induced increase in retirement is only temporary. People who retired due to the risk of the pandemic will return to work as new strategies emerge to reduce the risk to their health. With new varients popping up, we will have to keep an eye on how the trend ultimately plays out.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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