Americans' household income last year took the sharpest drop since the government began keeping records in 1947, the Census Bureau reported Thursday.
Median household income sank 3.6% to $50,303, after adjusting for inflation, during the first full year of the recession.
Income tumbled to its lowest dollar level since 1997 — a decade's worth of gains wiped out in one year — and things will get worse before they get better, says Sheldon Danziger of the Population Studies Center at the University of Michigan.
"2009 is going to be dreadful," he says. He predicts income will drop at least 5% this year because of rising unemployment in the recession's second year.
The Census Bureau's annual report on income and poverty is one of the most important benchmarks of the U.S. economy.
The income and poverty data reflect the sweeping effects of the recession, which began in December 2007 and has erased 6.9 million jobs. The report covers a wide range of pre-tax income, such as wages, Social Security payments and dividends. It doesn't count the value of non-cash benefits, such as food stamps or employee health insurance.
The cause of the income decline is clear. "The economy was slow. People lost work. Incomes fell," says Robert Rector, a senior fellow at the conservative Heritage Foundation.
Other key findings for 2008:
•Poverty rate jumps. The share of people living in poverty rose to 13.2% in 2008 from 12.5% in 2007. That's the highest poverty rate since 1997.
•Health coverage holds steady. The portion of people in the USA without health insurance was almost unchanged at 15.4% .
• Men and women, still different. Women earned 77% of what men made in 2008, unchanged from a year earlier.
•Seniors fare best. Of the 25 groups tracked by the Census, only households led by people 65 and older enjoyed income gains — a 1.2% increase. Doing worst: the middle-aged. Households headed by 45- to 54-year-olds suffered a 5.4% drop.
"Social Security and Medicare make a big difference for the elderly," says Minnesota state demographer Tom Gillaspy. He says the income report doesn't show the wealth lost by the elderly because of falling stock prices.