The Downslide Before the Downturn is based on the Middle Class Security Index, co-developed by Demos and IASP/ Brandeis, which uses government data and measures the financial security of the middle class by rating household stability across five core economic factors: assets; educational achievement; housing costs; budget; and healthcare. Based on how a family ranked in each of these factors, they were defined as financially "secure," "borderline," or "at risk."

The Downslide Before the Downturn shows some worrying trends in America's households, including:

- In 2006, before the recession, most U.S. middle class families (76 percent) were already economically insecure, with only 24 percent experiencing stability across the core index factors. However, when the numbers are broken down demographically, only 16 percent of African Americans and 12 percent of Latinos experienced such security. This is a dramatic decline from 2000, when the national average was 29 percent, 26 percent for African Americans and 23 percent for Latinos.

- In 2006, 88 percent of Latino and 94 percent of African-American households lacked sufficient assets to weather a financial emergency, up from 82 percent and 89 percent in 2000, respectively.

- The median value of financial assets held by African Americans declined by 33 percent in the six year period, while those held by Latinos declined by 60 percent during the same time.

- From 2000 to 2006, median housing costs increased 9 percent for African American households and 7.5 percent for Latino households.

- During the same period, the number of families in which at least one member lacked health insurance increased from 18 percent to 30 percent for African Americans and from 26 percent to 39 percent for Latinos.

"These results show the precarious position of families who struggle to make it into the middle class amidst policies that do not support broad economic opportunities. Even before things started to slip, African American and Latino middle class families were already on weaker footing, a position that sets them up to lose more ground than they can afford in the current economy," said Jennifer Wheary, one the report's coauthors and a Senior Fellow at Demos.

"The decline in assets experienced by these families is particularly alarming," said Tom Shapiro, professor and director of the Institute on Assets and Social Policy at Brandeis University. "Most of these families had few assets to start with. With the value of these assets declining just as families need them most, they will not only find it difficult to weather uncertain times, they'll also experience setbacks that will be felt by future generations. All this points to a need for policies that support asset building even in hard times."

The Downslide Before the Downturn is the fifth report in a series based on the Middle Class Security Index. Recent reports in this series examined the economic security of America's seniors and the overall position of the middle class heading into the recession. In addition to these reports, Demos and IASP/Brandeis have published a Middle Class Security Factsheet that provides information about the broad economic state of the middle class at a glance and a scorecard that individual families can use to measure their economic stability.