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Post-recession, pay kept falling

By Robert Pear
New York Times / October 10, 2011

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WASHINGTON - Household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent to $49,909, according to a study by two former Census Bureau officials. During the recession - from December 2007 to June 2009 - household income fell 3.2 percent.

The finding helps explain why attitudes toward the economy, the country’s direction, and political leaders have continued to sour even as the economy has been growing. Unhappiness and anger have come to dominate the political scene.

President Obama recently called the economic situation an emergency, and over the weekend he assailed congressional Republicans for opposing his jobs bill, which includes tax cuts that would raise take-home pay. Republicans blame Obama for the slump, saying he has issued a blizzard of regulations and promised future tax increases that have hurt business and consumer confidence.

Those arguments may be heard repeatedly this week as the Senate begins debating the jobs bill. The full bill - a mix of tax cuts, public works initiatives, unemployment benefits and other items, costing $447 billion over 10 years - is unlikely to pass, but individual parts seem to have a significant chance.

The full 9.8 percent drop in income from the start of the recession to this June - the most recent month in the study - appears to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline “a significant reduction in the American standard of living.’’

That reduction occurred even though the unemployment rate fell slightly, to 9.2 percent in June compared with 9.5 percent two years earlier. Two main forces appear to have held down pay: The number of people neither working nor looking for work has risen, and the pay of employed people has failed to keep pace with inflation, as the prices of oil products and many foods have jumped.

During the recession itself, wage gains outpaced inflation.

One reason pay has stagnated is that many people who lost their jobs in the recession - and remained out of work for months - have taken pay cuts in order to be hired again. In a separate study, Henry S. Farber, an economics professor at Princeton, found that people who lost jobs in the recession and later found work made an average of 17.5 percent less than they had in their old jobs.

“As a labor economist, I do not think the recession has ended,’’ Farber said. “Job losers are having more trouble than ever before finding full-time jobs.’’

Farber added that this downturn was “fundamentally different’’ from most previous ones. Historically, other economists say, financial crises and debt-caused bubbles have led to deeper downturns.

Green and Coder said the persistently high jobless rate and the long duration of unemployment helped explain the decline in income during the recovery.

In the recession, the average length of time a person who lost a job was unemployed increased to 24.1 weeks in June 2009, from 16.6 weeks in December 2007, according to the Bureau of Labor Statistics. Since the end of the recession, that figure has continued to increase, reaching 40.5 weeks in September, the longest in more than 60 years.

The study by Green and Coder is based on monthly census surveys, rather than the annual data that appeared in last month’s census report on income. The monthly figures allow researchers to measure income changes more precisely.

Green and Coder found that income dropped more, in percentage terms, for some groups already making less. From June 2007 to June of this year, median income declined by 7.8 percent for non-Hispanic whites, to $56,320, and by 6.8 percent for Hispanics, to $39,901. For blacks, household income declined 9.2 percent, to $31,784.