Is Economic Recovery Good For You?

by Timothy Noah | October 10, 2011

In 1965, while Daniel Patrick Moynihan, then an assistant secretary of Labor, was assembling his study, The Negro Family: The Case For National Action, his researchers discovered something curious. Previously welfare caseloads had increased when unemployment went up and decreased when it went down. Now, however, the two indices were "disaggregated." Unemployment was going down but welfare caseloads were still going up. "The numbers went blooey on me," Moynihan told Nicholas Lemann, author of The Promised Land: The Great Black Migration and How It Changed America. The "disaggregation" suggested that the economic problems suffered by low-income blacks were about more than the economy. They were also about the "tangle of pathologies" that thrived in ghetto culture. This finding, though subsequently rendered respectable by William Julius Wilson and other sociologists--and also by HBO's critically acclaimed The Wire--was quite controversial in its day (in large part, Lemann argues in The Promised Land, because Moynihan's intellectual vanity eclipsed his interest in addressing the problem of inner-city joblessness). Critics accused Moynihan of blaming the victim.

Now it's 2011 and a different sort of "disaggregation" is taking place, according to a new study that Robert Pear writes about today on Page One of the New York Times. Since the start of the weak economic recovery in 2009, median income has fallen faster than it did during the recession of 2007-2009. Nous sommes tous disaggregated.

It was already true, you may recall, that productivity has been rising quite sharply during the past decade even as the median household income has gone down. Until the aughts most economists would have been glad to tell you that this can't happen. Also, corporate profits have lately been higher, as a percentage of gross domestic product, than at any time since 1950. Now we learn that whereas during the 18-month recession household income fell (in real terms) 3.2 percent, during the two years of recovery that followed household income fell (in real terms) 6.7 percent. The recovery has been twice as hard on the typical person's pocketbook as the recession was! This calculation doesn't include federal taxes and federal benefits, which no doubt soften the blow, but that isn't the point. The point is that median income appears to be divorced from economic recovery. Except no, it's worse than that. Median income bears a relationship to economic recovery, but the relationship is (temporarily, anyway) inverse. Recovery goes up, median income goes down.

Presumably there's some point at which economic recovery becomes so robust that median income will start to rise, or at least will stop falling. But until that happens, you might see some angry people march on Wall Street. Oh, wait, that's already happening.

Source URL: http://www.newrepublic.com//blog/timothy-noah/95998/economic-recovery-good-you