The recession of 2007 may have felt like a once-in-a-lifetime disaster, but it’s just the latest shock in what has become a more volatile world for the typical American household, according to a leading expert on household finances.
In a new article published by the Brookings Institution, senior fellow Karen Dynan says that the ups and downs in household income have become about a third larger between the late 1960s and the middle part of the 2000s. What’s more, the share of households experiencing big drops in income — of 50% or more — has also increased, to about 12% in the mid-2000s from about 7% in the late 1960s.
As Ms. Dynan puts it: “It remains to be seen … whether the recent financial crisis will permanently change the availability of credit in a way that undoes the (relative) stability of household consumption.”
Fasten your seatbelts.