What exactly is the new normal? Politico says it’s pervasive rudeness. Huffington Post says it’s prosecuting whistleblowers while letting criminal bankers go free. On NBC this fall, it will be a sitcom about yet another dysfunctional household. We sure throw that term around a lot.
For most of us, though, the new normal is about a perpetually slow economy and what that means for our financial well being. The new normal for retirees is ultra-low savings rates that make income difficult to secure; for job seekers, it’s a tough market that means working for less. For homeowners, it’s lost equity and mobility. For just about everyone it means diminished opportunity.
That includes the world’s greatest minds. The cash awarded to the next round of Nobel Prize winners will be down by 20%, The New York Times reports. Each prize will now be worth $1.1 million, down from $1.4 million—the first reduction in the face value of the prize since 1949. Why cut the award? The Nobel Foundation’s investment portfolio lost 8% last year and returns have not kept pace with costs for a decade. Sounds a lot like the new normal in ordinary households, doesn’t it?
Witness the stunning finding, also reported in The New York Times, that U.S. families’ median net worth has fallen to levels last seen in the early 1990s. Citing a coming Federal Reserve report, The Times notes that two decades of accumulated prosperity has vanished; the median family net worth stands at $77,300, down from $126,400 before the Great Recession.
Median family income has also fallen—to $45,800 from $49,600 pre-crash. Much of the hit to net worth is from the housing collapse. The median value of Americans’ home equity has fallen to $75,000 from $110,000 before the financial crisis. Median means that half are higher and half are lower. All figures are adjusted for inflation.
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According to the Fed report:
- The share of families saving anything fell to 52% from 56.4% in 2007
- The share of families with education debt rose to 19.2% from 15.2% in 2007
- The middle class lost a larger share of their wealth and income than either the poor or the rich
Yet there was encouraging news buried in the findings. The share of households reporting any kind of debt fell by 2.1 percentage points to 74.9%. The share of families with credit card debt fell by 6.7 percentage points to 39.4% and the median balance fell 16.1% to $2,600. Americans are also carrying fewer credit cards. Meanwhile, more families are creating or beefing up an emergency fund. But saving for an emergency comes at the expense of investments for retirement, education or a home purchase. As much as anything, that is the new normal.