Yellen Says U.S. Poorest Remain ‘Extraordinarily Vulnerable’Jeff Kearns
Federal Reserve Chair Janet Yellen said a large share of American families with few assets to fall back on remain “extraordinarily vulnerable,” even after five years of economic expansion.
“We have come far from the worst moments of the crisis, and the economy continues to improve,” Yellen said today in prepared remarks in Washington. “But the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand.”
Yellen, who didn’t discuss the outlook for monetary policy, spoke a day after the U.S. central bank retained a commitment to wait a “considerable time” before raising the benchmark interest rate.
Her comments today are in keeping with her focus on the human costs of unemployment, which was the theme of her first major speech after becoming Fed chair in February. In the March 31 address, she spoke of “real people behind the statistics, struggling to get by and eager for the opportunity to build better lives.”
The financial crisis showed the need for diversification and savings to rely on during times of economic distress, Yellen said today to the Corporation for Enterprise Development. Yet financial assets such as 401(k) plans and pensions are still a “very small share” of assets for lower- and middle-income families.
Yellen, 68, cited a Fed report that showed the median net worth reported by the bottom fifth of households by income was just $6,400 last year, and many of the about 25 million households in that group “had no wealth or had negative net worth.” Their incomes have continued to fall and home equity values remain depressed, she said.
“Home equity accounts for the lion’s share of wealth for most families, and many of these families have not yet recovered the wealth they lost in the housing crisis,” Yellen said.
“The Federal Reserve’s mission is to promote a healthy economy and strong financial system, and that is why we have promoted and will continue to promote asset-building,” she said.
The economy is in its sixth year of expansion following the 18-month recession that ended June 2009, which was the longest and deepest since the Great Depression.
The jobless rate is down to 6.1 percent from a 26-year high of 10 percent in October 2009. Still, 7.28 million Americans work part-time because they can’t find full-time jobs, and wage growth barely outpaces inflation.
It has taken time for the poorest Americans to share in the benefits of the expansion, according to Census Bureau data released Sept. 16. The poverty rate eased to 14.5 percent in 2013 from 15 percent in the prior year, the first decline since 2006, the year before the last recession began.