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Poverty Rate in U.S. Rose to 15-Year High in 2009 as Recession Took a Toll

The poverty rate in the U.S. rose to the highest level in 15 years in 2009, underscoring the toll the recession took on the nation and adding fuel to an election- year debate over the Obama administration’s economic policies.

The proportion of people living in poverty climbed to 14.3 percent from 13.2 percent, according to a Census Bureau report released today. The number of people classified as poor rose to 43.6 million, the largest number in the 51 years for which the figures have been published.

“The poverty rate is bad and is going to get worse and remain high the rest of the decade,” said Isabel Sawhill, a senior fellow at the Brookings Institution in Washington, a policy research group. She forecasts the rate will rise to 16 percent by mid-decade. “We really should be strengthening the safety net programs, not just because people need help but also it will maintain purchasing power among a large group of people.”

The report comes as Congress debates the effectiveness of more spending to reduce an unemployment rate that’s close to a 26-year high. President Barack Obama last week urged approval of a package of $180 billion in business tax breaks and infrastructure spending to boost the economy, a proposed supplement to the $814 billion stimulus measure enacted last year.

“Today’s numbers make it clear that our work is just beginning,” Obama said in a statement. He urged policies “to improve our schools, build the skills of our workers, and invest in our nation’s critical infrastructure.”

Median Income

The median household income fell to $49,777 last year from $50,112 in 2008, a change the Census Bureau report said isn’t statistically significant.

The 1.1 percentage point increase in the poverty rate was the biggest increase since 1980, Census Bureau officials said on a conference call with reporters. The number of poor increased from 39.8 million in 2008. The poverty threshold in 2009 was defined as $21,954 in income for a family of four.

“High levels of poverty reflect the large increase in unemployment and underemployment of the workforce,” said Heather Boushey, a senior economist at the Center for American Progress, a research organization headed by John Podesta, who managed Obama’s transition team after he was elected in 2008. “We are stuck in a negative spiral where high unemployment leads to a lack of demand.”

Jobless Rate

The unemployment rate in the U.S. has risen to 9.6 percent in August from 5 percent in December 2007, when the recession began. While the rate has dropped from 10.1 percent last October, sluggish private job creation following the loss of 8.4 million jobs has weighed on incomes and consumer spending, slowing the pace of recovery.

The so-called underemployment rate -- which includes part time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 16.7 percent in August from 16.5 percent in July.

Brandy Burkhead, 28, lost her $13-a-hour job as a medical assistant in Chapel Hill, North Carolina, in April. She was among the more 500 people lined up by midmorning today to apply for work at a Tanger Outlet Center in Mebane, North Carolina.

“It’s a battle,” said Burkhead, a mother of three. She said her husband, Stevie, last worked installing car windshields about six years ago, leaving the family dependent on monthly unemployment benefits of $600 month and help from relatives. “We’re living off of nothing,” she said.

Regional Breakdown

Among U.S. regions, real median income declined between 2008 and 2009 in the Midwest and West, while the changes for the Northeast and South weren’t statistically significant. The poverty rate isn’t statistically different from 2008 for Asians, while it increased for all other race groups and Hispanics.

Non-farm payrolls have increased 723,000 in the eight months through August, according to Labor Department data, showing it will take years to recoup the 8.4 million jobs lost during the recession. Unemployment will average more than 9 percent through 2011, according to a survey of economists by Bloomberg News this month.

The rise in poverty is putting a strain on social services and charities.

Demand at food banks rose 46 percent between 2006 and 2010, according to Feeding America, a network of U.S. food banks. “There has been a stunning, catastrophic increase in demand,” said Ross Fraser, spokesman for the Chicago-based group.

‘Financial Distress’

“The average American remains gripped by financial distress,” said Mark Cole, chief operating officer for Atlanta- based CredAbility, which provides nonprofit credit counseling. “Everything has slipped a notch across the board. Middle class are slipping to lower middle class, and the lower middle class are slipping into poverty.”

An index of consumers’ financial distress that includes credit, housing, and employment put together by CredAbility reached a low in the fourth quarter of 2009. States whose consumers are in the most financial distress included Nevada, Mississippi, Florida, Michigan and South Carolina, according to the group’s second quarter 2010 index.

Wal-Mart Stores Inc., the world’s largest retailer, is finding its U.S. customers more “challenged” in making purchases, with some waiting to buy baby formula until paychecks or assistance checks are issued, William Simon, president and chief operating officer for its U.S. operations, said at an investment conference this week.

“Unemployment, we all know, remains mid-9s and doesn’t appear to be going anywhere quickly,” he said, noting “an ever-increasing amount of transactions being paid for with government assistance.”

Health Insurance

The number of people without health insurance coverage rose from 46.3 million in 2008 to 50.7 million in 2009, while the percentage increased from 15.4 percent to 16.7 percent over the same period, according to today’s Census Bureau report. In March, Obama signed into law a sweeping rewrite of U.S. health- care policy that ensures millions more will be covered.

During the economic expansion of the 1990s, the poverty rate declined each year from 15.1 percent in 1993 to 11.3 percent in 2000, according to previously published data. It then climbed to 11.7 percent in 2001, as the nation slid into recession, and continued its ascent to 12.7 percent in 2004.

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net;

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