This article has lots of interesting data. But things might not be as bad as the headline indicates. Although the middle class has shrunk, the upper class has grown more than the lower class.
The article mentions that wealth has increased, in percentage terms, more for the top quintile than the middle quantile. But people do move between quintiles. Usually after 10 years, about half the people in the top quintile have fallen to a lower quintile.
It mentions middle class wages only growing slightly over time. But this could party be caused by high income older workers retiring being replaced by low income young workers. That tends to lower he average or keep it from rising much. It does not mean things are getting worse.
Look for the paragraph I highlighted in red below. Its first sentence is "Counting all kinds of debt, including mortgages, consumers aren’t nearly as debt-burdened as they once were." That sounds like good news.
Excerpts from the article:
"Consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation. Mortgage debt slid after the financial crisis a decade ago but is rebounding.
Student debt totaled about $1.5 trillion last year, exceeding all other forms of consumer debt except mortgages.
Auto debt is up nearly 40% adjusting for inflation in the last decade to $1.3 trillion. And the average loan for new cars is up an inflation-adjusted 11% in a decade, to $32,187"
"Median household income in the U.S. was $61,372 at the end of 2017, according to the Census Bureau. When inflation is taken into account, that is just above the 1999 level. Over a longer stretch—the three decades through 2017—incomes are up 14% in inflation-adjusted terms.
Average housing prices, however, swelled 290% over those three decades in inflation-adjusted terms, according to an analysis by Adam Levitin, a Georgetown Law professor who studies bankruptcy, financial regulation and consumer finance."
"The median net worth of households in the middle 20% of income rose 4% in inflation-adjusted terms to $81,900 between 1989 and 2016, the latest available data. For households in the top 20%, median net worth more than doubled to $811,860. And for the top 1%, the increase was 178% to $11,206,000."
"Counting all kinds of debt, including mortgages, consumers aren’t nearly as debt-burdened as they once were. In the fourth quarter of 2007, the last year before the financial crisis struck, households devoted 13.2% of their disposable income to debt service. In the first quarter of 2019, that number was 9.9%, largely due to low interest rates.
Partly because of widespread refinancing, mortgage payments since the start of 2017 have claimed the smallest slice of disposable personal income in decades, in the low 4% range, according to Fed data.
Other debt, such as auto and student loans and credit-card borrowing, consumed about 5.7% of disposable personal income in the first quarter. That was up from a low of 4.9% at the end of 2012 and back to 2009 levels. In contrast to a mortgage, most of this borrowing went to fund consumption."
"Nowhere is the struggle to maintain a middle-class lifestyle more apparent than in cars. The average new-car price in the U.S. was $37,285 in June, according to Kelley Blue Book. It didn’t deter buyers. The industry sold or leased at least 17 million cars each year from 2015 to 2018, its best four-year stretch ever. Partly because of demand satisfied by that run, sales are projected to be off modestly this year.
How households earning $61,000 can acquire cars costing half their gross income is a story of the financialization of the economy. Some 85% of new cars in the first quarter of this year were financed, including leases, according to Experian. That is up from 76% in the first quarter of 2009.
And 32% of new-car loans were for six to seven years. A decade ago, only 12% were that long. The shorter-term loans of the past gave many owners several years of driving without car payments.
Now, a third of new car buyers roll debt from their old loans into a new one. That’s up from roughly 25% in the years before the financial crisis. The average amount rolled into the new loan is just over $5,000, according to Edmunds, an auto-industry research firm.
Leasing, which often entails lower payments than purchase loans, accounted for 34% of financed new vehicles in the first quarter, up from 20% a decade earlier, according to Experian. Drivers of used cars also finance them—more than half did last year."
No comments:
Post a Comment