Unexpectedly Intriguing!
November 2, 2016

After having stalled out at a nominal average value of approximately $57,200 from December 2015 through July 2016, median household income appears to have begun increasing again in recent months, with September 2016 seeing the figure rise to $57,616.

But after adjusting for inflation, we see that real median household income has actually fallen during 2016, where in terms of constant September 2016 U.S. dollars, it has dropped from a peak of $58,379 in January 2016 (it was slightly lower at $58,338 in December 2015) to September 2016's $57,616. That figure is up however from the trough of $57,137 that applied for real median household income in July 2016.

U.S. Median Household Income, January 2000 through October 2016

Those observations mesh with what we've observed for the recent trends for dividends paid by U.S. firms, which indicated economic slowing coming into 2016 that has only begun to reverse in recent months.

Median household income may be considered to be an excellent proxy for assessing the relative health of the U.S. economy because it is directly correlated with the average annual spending by U.S. consumer units. What the real median household income data for 2016 indicates is that while the economic well-being of American households has improved in recent months, through September 2016, they are not as well off as they were in December 2015/January 2016, as their purchasing power has declined on the year even though their nominal incomes have increased.

References

National Bureau of Economic Research. U.S. Business Cycle Expansions and Contractions. [Online Database]. Accessed 27 October 2016.

Sentier Research. Household Income Trends. [PDF Document]. Accessed 27 October 2016.

U.S. Department of Labor. Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100, Not Seasonally Adjusted. [Online Database]. Accessed 27 October 2016.


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