September 4, 2014

Income gains since 2010 came mostly on the high end

Wealthier households saw their income rise between 2010 and 2013, while many middle- and low-income households suffered losses.

Only the rich saw their incomes benefit from the economic recovery during 2010-2013, as earnings stagnated or fell for all others, a report from the Federal Reserve showed Thursday.

Median income adjusted for inflation rose 2 percent to $223,200 for the wealthiest 10 percent of households from 2010 to 2013, the Fed said from Washington in its Survey of Consumer Finances. The bottom 60 percent saw the biggest declines.

The improvement in consumer finances has become increasingly stratified during the recovery, thanks in part to gains in the stock and housing markets that have been boosted by the Fed’s unprecedented stimulus. Meanwhile the labor market has been slower to progress, with wages remaining stagnant for many workers, aggravating the disparity in income.

The report “reveals substantial disparities in the evolution of income and net worth” since 2010, Fed economists wrote.

The median, or mid-point, income for all families fell 5 percent from 2010 to 2013, while mean, or average, income climbed 4 percent, the data show. That’s “consistent with increasing income concentration during this period,” the report stated.

Median net worth fell 2 percent to $81,200 from 2010 to 2013, while mean net worth was little changed at $534,600.

Households with access to assets such as homes and stock portfolios have found their wealth buoyed over the last three years. The Standard & Poor’s 500 Index climbed 47 percent in the three years ended December 2013, while the S&P/Case Shiller index of property values climbed 13.4 percent in the same time period.

Americans without such assets may have found the recovery in their finances slower-going, due in part to a labor market that’s been gradual in gaining momentum. With a “substantial degree” of labor market slack, “the need for extraordinary accommodation is unambiguous,” Fed Chair Janet Yellen said in an Aug. 22 speech at the Kansas City Fed’s economic conference in Jackson Hole, Wyo.

The top 10 percent of families by wealth got 46.7 percent of their pre-tax income from wages in 2013, down from 55.8 percent in 2010, the survey found. The share earned from capital gains climbed to 10.6 percent from 2.3 percent.

That compares with the 73.7 percent received from wages by the poorest households in 2013, a decrease from 75.9 percent three years earlier. Those families received less than 0.05 percent of their incomes from capital gains last year.

The proportion of families with retirement accounts decreased 1.2 percentage points to 49.2 percent during the three years ended 2013, according to the report. The decline was driven by those in the bottom half of the income distribution, while participation among families in the top 10 percent increased.

Households have spent much of the economic expansion cleaning up their balance sheets, and many remain cautious about taking out more loans. The share of families holding any type of debt declined to 74.5 percent in 2013 from 74.9 percent in 2010, while the median value of the debt fell 20 percent to $60,400.

The share of those with mortgages or other home-secured debt declined to 42.9 percent from 47 percent in the same time frame. That overshadowed a drop in the percentage of families who owned a home, which fell to 65.2 percent last year from 67.3 percent in 2010.

Credit-card debt as a share of household borrowings was at 2.4 percent, a record low in data from the consumer finances survey going back to 1989. The median family credit card balance was $2,300 last year, down from $2,800 in 2010.

Fed economists conduct the survey once every three years to produce a snapshot of household balance sheets, pensions, income and demographics that’s more detailed than broader reports about the economy. The surveys allow comparisons over time, with consistent methodology since 1989.

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