If Leave It to Beaver epitomized the seemingly idyllic American middle class of the 1960s, The Middle, a show in which each of the parents were briefly out of work and their oldest son drove a 35-year-old Ford badly in need of a paint job, captured the pain inflicted on it by the Great Recession.
The recovery from that downturn, starting in 2009, was slow and gains in employment often masked the lack of well-paying middle-income jobs, relying instead on gains at the top and bottom of the pay scale.
"This long-term hollowing out of jobs in the middle of the wage distribution has helped fuel rising wage inequality, and has contributed to a growing sense for some that they are being left behind," New York Federal Reserve Bank President William Dudley said at a news briefing on Thursday. Finally, however, "the tide has begun to turn," he said.
The U.S. economy added 2.3 million jobs paying $30,000 to $50,000 a year, the middle of the national pay scale, from 2013 to 2015, almost double the pace in the first three years after the recession, which ended in 2009. Among the leaders in renewed gains are construction jobs, which increased by 400,000 in the two years through 2015.
The delayed rebound in that industry was largely because the recession, which began in late 2007, was driven by the collapse of a housing-market bubble, said Jaison Abel, head of regional analysis for the New York Fed. In the preceding years, banks had begun packaging mortgages of widely varying quality into securities, which were then sold to Wall Street and other investors, enabling them to record profits immediately.
Since the lenders weren't holding the loans they made on their own books, they were less concerned with borrowers' ability to repay, and home buyers often purchased residences beyond their means, believing that a continuous surge in the housing market would enable them to refinance before the higher rates on adjustable-rate mortgages kicked in. The mortgage market for one- to four-family homes widened 46% to $11.3 trillion in just four years, according to Federal Reserve data.
When the housing market began to contract, however, buyers dried up and borrowers were stuck with loans they couldn't pay. Defaults surged and mortgage-backed securities became impossible to value, eventually leading to the collapse of Lehman Brothers, then the fourth-largest U.S. bank, and a global credit crisis that forced the U.S. government to spend billions on bailouts.
