You've probably heard that the middle class is reeling. Jobs are scarce. Incomes are down. Everybody's worried about the future.
The latest testament to middle-class woes is a detailed report by the Pew Research Center that decries a "lost decade" in which mainstream Americans mostly slid backward. "Since 2000," the report declares, "the middle class has shrunk in size, fallen backward in income and wealth, and shed some—but by no means all—of its characteristic faith in the future."
Numerous news outlets reported Pew's findings as indisputable fact. But those news reports mostly overlooked some good news that Pew itself discovered: Americans' remain surprisingly upbeat about their lives, and report higher levels of satisfaction than you'd expect for a group that has been financially pummeled and has yet to recover.
For instance, 72 percent of respondents in Pew's survey said they're either somewhat or very satisfied with their personal financial situation. Just 26 percent said they're dissatisfied. Americans seem remarkably sanguine, considering that median income over the last five years has fallen by the largest amount since the Great Depression.
Here's another head-scratcher: 90 percent of those polled said they're satisfied with their housing situation. Haven't they heard about the housing bust? That's the phenomenon in which home values have fallen by more than 30 percent since 2006, leaving nearly one third of mortgage holders owing more than their home is worth. As Pew itself points out, the median net worth of a middle-income family has fallen by about $60,000 since 2007, mainly because so much home equity has evaporated. But why should that phase anybody? Americans are also remarkably content with the way things are going at home, with 94 percent saying they're satisfied with their family lives. Apparently those reality TV shows about sour housewives in dysfunctional, unhappy families aren't so realistic after all.
Finally, there's the "hollowing out" of the middle class, as Pew and others call it. Pew analyzed Census data to show that in 1971, 61 percent of American adults fell into a tier defined as middle-income. By 2011, that had shrunk by 10 points to just 51 percent of adults. But the tier defined as upper income increased by six percentage points over the same time frame, while the lower-income tier increased by just four points. That suggests more people left the middle class by moving up than by moving down.
The problems facing the middle class, nonetheless, are real and worrisome. The United States could easily face another lost decade if jobs don't materialize and incomes don't start growing again. A continuation of current trends would push living standards down even further, while creating more poverty, a huge hole in the social safety net, and a bleaker future for our kids than most of us would care to contemplate.
Signs of satisfaction among the middle class don't invalidate other convincing data showing that prosperity is fading. But they do suggest a couple of important things that the headlines haven't captured very well. First, Americans seem to be adapting to a tougher economy by paying down debt, spending less, saving more, and weaning themselves off unnecessary frivolities. Whether you're satisfied or not depends on what your expectations are, and if you downsize your expectations you're likely to feel happier with less--sort of like the Whos in Whoville. That may be why a majority of people report feeling satisfied, even though data on incomes, housing, and wealth makes it clear the majority of Americans are worse off than they were just a few years ago.
Some Americans may also feel that things are getting better, with a sense of relief that they narrowly escaped disaster. The economy is still weak, but most people know it's not nearly as scary as it was in 2008 and 2009, when a genuine depression seemed possible. Housing seems to have bottomed out, the stock market has been surprisingly buoyant, and the recovery, while anemic, hasn't collapsed. So maybe brighter days do in fact lie ahead, and the people necessary to make a renaissance happen sense it coming.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.