Unexpectedly Intriguing!
May 7, 2020

Political Calculations' estimate of median household income started to show the bite of the coronavirus recession in March 2020, with an initial estimate of $66,458, a decline of 0.1% from February 2020's estimate of $66,538.

That small change is consistent with the economic impact of business closures and stay-at-home orders imposed by state governors reacting to the risk of coronavirus infections being concentrated in the final weeks of March 2020. At the same time, the corresponding layoffs resulting from the business closures have been concentrated among lower income-earning occupations.

The following chart shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through March 2020. The inflation-adjusted figures are presented in terms of constant March 2020 U.S. dollars.

Median Household Income in the 21st Century: Nominal and Real Modeled Estimates, January 2000 to March 2020

The chart shows the greater relevance of nominal income data over inflation-adjusted data in assessing the current economic climate, with the inflation-adjusted median household income actually rising in March 2020, because of oil prices falling hard during the month.

Looking at the year-over-year rate of change for median household income, the following chart confirms the nominal trend has nosed sharply over and begun decelerating as of March 2020.

Median Household Income in the 21st Century: Year Over Year Growth Rate, January 2001 to March 2020

With the sharp rise of weekly unemployment claims in April, we anticipate more rough news for median household income in the U.S. in our next analysis.

Analyst's Notes

The peak value for nominal median household income of $66,533 in February 2020 shown in the chart above represents the effects of a small revision from the data we used to create our initial estimate for the month. We continue to anticipate the aggregate personal income data we use in generating our estimates will be subject to substantial revision given the extent of the coronavirus recession's disruption to the U.S. economy.

Since our estimates are tied to that data, until those revisions occur, we think our estimates will overstate the level of median household income in the U.S. until the economic situation stabilizes.

Other Analyst's Notes

Sentier Research suspended reporting its monthly Current Population Survey-based estimates of median household income, concluding their series with data for December 2019. In its absence, we are providing the estimates from our alternate methodology. Our data sources are presented in the following section.

References

Sentier Research. Household Income Trends: January 2000 through December 2019. [Excel Spreadsheet with Nominal Median Household Incomes for January 2000 through January 2013 courtesy of Doug Short]. [PDF Document]. Accessed 6 February 2020. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars.]

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. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 10 April 2020. Accessed: 10 April 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 30 April 2020. Accessed: 1 May 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 30 April 2020. Accessed: 1 May 2020.

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