The articles on the Fed’s Survey of Consumer Finance release from yesterday give you an excellent flavor of the magnitude of what’s been lost in the Great Recession. But I haven’t seen this figure posted yet (though I may have missed it somewhere, of course).
It’s simply the trend in real median net worth from the SCFs going back to 1989 (this survey is taken every three years; see data caveats below). There’s a little dip in the 1990s downturn, a flattening in the 2001 recession, and then…a massive cliff dive in the Great Recession.
We’re talking two decades of gains, gone. Now, it is important to recognize that some those gains, particularly those from that steep climb you see in the latter 2000s, were the housing bubble at work inflating home prices. And since homes are the primary asset of many in the middle class, that in turn inflated median net worth.
Source: SCF, my adjustments to pre-2001 data using CPI-RS (see data note below)
But there’s no way a shock of that magnitude would not throw our economy way off track. I’m all for criticizing policy makers, of which I was one at the time, for not going far enough in offsetting this shock. But this is a particularly clear picture of the depth of the economic hole we dug for ourselves, in no small part due to our allegiance to deregulatory zealots, “efficient (i.e., self-regulating) market hypotheses,” and financialization.
Data caveats: As far as I can tell, the Federal Reserve has not yet released pre-2001 data adjusted for inflation as in yesterday’s release. I did the adjustments myself and got very close (<0.4% difference) on numbers that showed up in both earlier years and yesterday. So this should be the same picture that comes out when they release the earlier data later this month.