The last time this occured for this long a period was the Great Depression 1932-1936. If it is true that "China imports inflation in commodities (raw materials), and exports deflation in manufactured goods (because it makes them with ultra cheap labor), american families in manufacturing or small supply companies either as owners or workers can't get their wages hirer without losing market share to people who buy cheaper Chineese products. The financial storm of the centry would be collapse of Ford and GM (and loss of retirement benefits and health benefits in every community across the country to millions of retirees), increase in fuel prices to $4.00 to $5.00 a gal, increased high metal demand from China and India, increased amounts of low wages or recycling of workers to lower wage jobs due to outsourcing. Chavez in South America has said he would cut us off. Nigeria doesn't want to cut oil production but might have a revolution blocking oil, Iran could cut us off over the nuclear thing, and largest oil field in Mexico may have to reduce production by 50% soon. Here's the family income decline story. Again this hasn't happened in about 70 years in the U.S. Question: Does anybody have a plan on how to deal with this looming problem?
Fed Study Finds Drop
In Household Incomes
DOW JONES NEWSWIRES
February 23, 2006 2:10 p.m.
WASHINGTON -- Average U.S. household incomes fell in the 2001-04 period after adjusting for inflation, and growth in household wealth slowed sharply from the previous three years, according to Federal Reserve data released Thursday.
The Fed's most recent Survey of Consumer Finances shows real average household income shrank in the latest three-year period covered after growing by more than 10% in both the 1998-2001 and 1995-98 periods.
DIG DEEPER
Read the complete text of the Federal Reserve's report on changes in family finances from 2001 to 2004.
Average household net worth still rose 6.3% on an inflation-adjusted basis, "however, the measured gains in wealth in the 2001-04 period pale in comparison with the much larger increase of the preceding three years," according to a summary of the Fed survey results.
In the 1998-2001 period, net worth surged 28.7%, and in the three years before that it grew 25.6%, the survey data show.
Household debt as a percentage of assets increased to 15.0% in 2004 from 12.1% three years earlier, with residential real estate's share of total debt holding steady at about three-fourths. "Even with interest rates lower in 2004 than in 2001, the (survey) data show a moderate increase in measures of debt burden," the Fed said.
The Fed also shows some signs of increased wealth inequality. The data show median wealth dropped for families with the bottom 40% of incomes, and rose for higher-income families. But on an average basis, net worth either held steady or increased for all income groups.
With interest rates generally lower and stock markets trending down in the latest three-year period, the overall share of financial assets in household portfolios declined. Families that held stocks directly or through managed funds fell to about 49% in 2004 from 52% three years earlier.
FINANCIAL SNAPSHOT
Median net worth of U.S. households, in 2004 dollars
1995 $70,800 1998 $83,100 2001 $91,700 2004 $93,100 Fraction of families with stock, including retirement accounts and value of median portfolio in 2004 dollars
1995 0.4% $18,000 1998 48.9% $29,000 2001 51.9% $36,700 2004 48.6% $24,300 Source: Federal Reserve Survey of Consumer Finances
An increase in nonfinancial assets, primarily real estate, helped to balance the decline. Nonfinancial assets grew to 64.3% of total assets in 2004 from 58.0% three years earlier. Homeownership was up 1.4 percentage points to 69.1% in the latest three-year period, while home values rose dramatically in many areas, the survey shows.
Separately, initial jobless claims decreased by 20,000 to a seasonally adjusted 278,000 in the week ending Feb. 18, the Labor Department said Thursday. The four-week moving average of initial jobless claims fell last week, down by 1,500 to 281,750 from 283,250. New claims for the week ending Feb. 11 increased by 20,000 to 298,000, revised higher from a previously reported 297,000. (Full report)
The Labor Department said the number of workers drawing unemployment benefits for more than a week increased in the week ended Feb. 11, the latest week for which such data are available. These continuing jobless claims climbed by 41,000 to 2,495,000. The jobless rate for workers with unemployment insurance was 1.9%, unchanged from the previous week.
Also Thursday, the Conference Board said its help-wanted advertising index slipped to 37 in January from a revised reading of 38 the prior month. A year ago, the index stood at 42, the private research group said. During the past three months, help-wanted advertising increased in five of the nine U.S. regions, with the 5.8% gain in the Middle Atlantic region the largest.
"Economic growth may be picking up in the first quarter, but the labor market indicators aren't showing much improvement through January," said Conference Board economist Ken Goldstein. "The economy only generated about 195,000 new jobs in January."



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