Despite what the politicians tell us about economic growth in the U.S economy, Americans are earning significantly less today than they did before the 2008 financial crisis.
The U.S. Census Bureau just reported that in 2014, real median household income in the U.S. economy was 6.5% lower than in 2007. This is the income adjusted for inflation. (Source: U.S. Census Bureau, last accessed September 17, 2015.)
And poverty remains a big problem for the U.S. economy. In 2014, 46.7 million Americans, or about 15% of the entire population, were living in poverty. This number is unchanged from 2013 and is higher than in 2007.
Here’s the real kicker: in 2014 there were two groups that saw their poverty rate jump—those with an education of a bachelor’s degree or higher, and married couples with families! If we are experiencing economic growth, as we have been told, why is the poverty rate rising?
But it’s not just the decline in real median income in the U.S. economy or the rise in the number of people living below the poverty line that gives me concern about this so-called economic “recovery.” When we dig deeper, there are more alarming issues.
For instance, from what we hear in the news, the housing market in the U.S. economy is hot again. How often have you heard the mainstream media say New York apartments are selling for extraordinary prices and that luxury home prices are on the rise? With this in mind, look at the chart below that plots the homeownership rate for the United States.
Source: Federal Reserve Bank of St. Louis web site,
last accessed September 17, 2015
The home ownership rate in the U.S. economy has been declining since 2005. Fewer and fewer Americans own the homes they live in. The home ownership rate in the U.S. economy sits at its lowest level since the 1970s!
Dear reader, the list of problems faced by middle-class Americans is too long to mention here. Aside from what I’ve just told you about above, the jobs market is still anemic (because it excludes people who have given up looking for work and those workers with part-time jobs who can’t get full-time jobs), the labor force participation rate is at its lowest level in decades, food stamp usage is still staggeringly high, rents are rising, student debt is piling higher, and the prices of general goods continue to go higher. This is not a recipe for economic growth; in fact, it accelerates an economic slowdown.
U.S. Economic Slowdown Ahead?
The Federal Reserve’s printing of massive amounts of new money didn’t do much for the average American; it did especially nothing for the poor. The easy money policies of the Fed since the Credit Crisis of 2008 made Wall Street richer, made banks bigger and more profitable—it made the rich richer. But in an economy of 320 million people, helping the one percent doesn’t result in economic growth.
That’s why I believe the U.S. economy is in the midst of an economic slowdown that will lead to a recession in 2016. The contraction in the earnings of U.S. corporations tells us there is a problem. That problem is that we cannot have economic growth if the consumers, whose purchasing activities make up 70% of gross domestic product (GDP), are suffering.