Ghosts of the Recession Still Not Fully Exorcised

There was good news and bad news in the Census Bureau’s latest reports on income and poverty. On the positive front, most household incomes rose slightly in 1996, thanks to the continued improvement of the economy. Significantly, minorities are benefiting from the recovery. The downside is that poverty deepened among the poorest of the poor. Clearly the nation-- California included--still has a way to go before recouping losses suffered in the recession of the early 1990s.

The Clinton administration tried to put a favorable spin on the numbers, noting that the median household income continues to improve. In California the census study showed that median income rose 5% to $38,812 after bottoming out in 1993. But the 1996 figure was still about 7% below the pre-recession peak of nearly $42,000 (in inflation-adjusted dollars) in 1989. Nationally the median income rose slightly to $35,492 but fell short of a high of $36,575 in 1989. The slight upswing in income was recorded among all ethnic groups.

A positive note came in the housing statistics. The strong economy, solid job growth, low interest rates and fairer lending practices have made homeownership more affordable and more available to minorities. Ownership nationally grew by 3.4 million households in the last three years and minorities accounted for 29% of that increase, according to a study of census data by Harvard’s Joint Center for Housing Studies. New Latino homeowners posted the biggest rise, 16.3%.

The most troubling news was a 1.8% decline in the income of the poorest 20% of families from 1995 to 1996. In California the poverty rate dipped to 16.8% but remained significantly higher than the national rate of 13.7%. Poverty in the Los Angeles metropolitan area was measured at 18.7% of households.

These troubling poverty trends pose challenges, especially to the state and Los Angeles. Poor families have to depend on public programs for health care. Rental housing for low-income households is at risk because of cutbacks in federal housing programs, according to the Harvard study.

California, with its large number of poverty households, will face special problems with welfare reform. As income grows at the top, sound government policies should be used to deliver better transportation and other daily necessities at the bottom.