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Originally published August 21, 2013 at 5:02 PM | Page modified August 22, 2013 at 8:44 AM

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U.S. consumers’ buying power remains depressed by recession

Although the incomes of average Americans have been recovering from their recent low point in August 2011, they remain 6.1 percent below where they stood when the country toppled into recession in December 2007.

The Washington Post

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WASHINGTON — The buying power of Americans continues to be weaker than it was when the recession ended four years ago, underscoring the lasting damage wrought by the downturn, according to a report released Wednesday.

Inflation-adjusted median household income has fallen 4.4 percent to $52,098 since June 2009, the official end of the recession, said the report by Sentier Research, an Annapolis data-analysis firm headed by two former Census Bureau officials.

Although the incomes of average Americans have been recovering from their recent low point in August 2011, they remain 6.1 percent below where they stood when the country toppled into recession in December 2007.

Overall, median income has declined by 7.2 percent since January 2000, the report said, offering fresh evidence of the deep economic stagnation the nation has suffered for more than a decade.

Median income, which economists view as a key marker for the well-being of the nation’s middle class, is lagging across education levels and racial groups, the report said. Analysts said the report also reflects the increasing economic polarization apparent in other data.

“Median income is affected by trends in inequality, and you are seeing that to the extent there has been income growth in the past decade, it has disproportionately gone to those at the top and very top,” said Gregory Acs, director of the Income & Benefits Policy Center at the Urban Institute, a research organization.

So far in the current recovery, median incomes are defying efforts by Americans to improve their work-force skills, according to the report, compiled by analyzing data from the Census Bureau’s monthly Current Population Survey.

Income is down even though the number of households headed by people who report having a college degree is up sharply since the end of the recession, according to the report.

Between June 2009 and June 2013, the number of American households headed by people holding associate degrees is up 14.7 percent, while those with bachelor’s degrees are up 10.1 percent and those with some college are up 4 percent.

Conversely, the number of homes headed by people who did not graduate from high school is down 7.9 percent and those led by people with just a high-school diploma has declined 1.2 percent since 2009, according to the report.

Analysts said those changes likely reflect two facts:

Americans, particularly those without college degrees, have been slow to move out and establish households in the wake of the downturn.

Many Americans are working to bolster their credentials to help them navigate a labor market that has seen a pronounced decline in good-paying “mid-skill” jobs.

Indeed, education pays in the labor market. Households headed by people who did not finish high school saw their median income drop 6.9 percent over the past four years to $24,448.

For households headed by people with at least a bachelor’s degree, median income also declined by more than 6 percent. But their median income was still significantly higher, $84,705, the report said.

“People are trying to build their human capital and improve their skills to compete in this tough labor marker,” said Gordon Green, co-author of the report and a partner at Sentier.

The years since the recession have been particularly hard on black households, who were hard hit by the downturn and saw their median income drop by 10.9 percent to $33,519 since the start of the economic recovery. That finding is consistent with the tough labor market for African Americans, who have a 12.6 percent unemployment rate — far above the national rate of 7.4 percent.

Median income for Hispanic households is down to $40,979, a 4.5 percent decline since 2009. Meanwhile, white household median income dipped 3.6 percent to $58,000 since the end of the recession.

Incomes are down among all age groups, except for those over age 65, which largely reflects the sturdiness of Social Security and other retirement benefits. Households headed by people under age 25 saw median income drop by 9.6 percent during the first four years of the recovery, a decline nearly matched by those 55 to 64 years, whose median income is down 7 percent to $58,432 since 2009.

The downward trajectory of median incomes in the wake of the recession only adds to the stagnation in middle-class wages that have dogged workers for more than 10 years.

In past decades, incomes dipped during recessions only to quickly bounce back during economic recoveries. But after the early 2000 recession, median incomes made a slow climb but never reached their previous peak before plummeting again when the 2007 downturn hit.

“It is not uncommon in a bad recession to see significant drops in median household income,” Acs said. “But what is a bit surprising here is how long it is taking to recover.”

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