A new Pew Research Center report finds that for the typical American household, the Great Recession that began more than a year ago came on the heels of a less dramatic but equally unusual economic phenomenon: a Phantom Recovery.
The Center's analysis of Census Bureau data finds that inflation-adjusted median household income—arguably the best single measure of the middle class standard of living—has remained at or below its 1999 peak in every year since then, first during the shallow recession at the start of this decade and later during the economic expansion that lasted from the end of 2001 to the end of 2007.
Overall, the eight-year period from 1999 through 2007 is the longest in modern U.S. economic history in which inflation-adjusted median household income failed to surpass an earlier peak. The Census Bureau has not yet released household income data for 2008, but the current recession (which officially began in December 2007) likely kept this key indicator below its 1999 peak again last year, and may keep it there into the next decade.
These new findings were presented to the Senate Finance Committee by Pew Research Center Executive Vice President Paul Taylor, who appeared as a witness at its hearing on middle-class tax relief.