By James Saft
(Reuters) – It won’t be the American consumer who powers the economy and financial markets.
An examination of the Federal Reserve’s new tri-annual Survey of Consumer Finances goo.gl/AxYTJ shows we didn’t just suffer a debt bubble – we had an income drought.
The statistics are stark: in the three years through 2010 the median family saw its net worth fall by nearly 40 percent, wiping almost two decades of asset accumulation off of the books. The real source of concern was a 7.7 percent drop in real income in the period, leaving many families still struggling with intractable debts.
There are two really important takeaways from the survey.
First, U.S. households, far from being a source of real pent-up demand, are sailing into their retirement years with very little wriggle room. Saving has been deferred, yet again, and consumption will have a very difficult time driving growth.
Second, and unsurprisingly, the poor and volatile performance of equities during the bubble years has driven savers away from the asset class, setting them up for another potential disappointment.