Unexpectedly Intriguing!
October 21, 2020

"Are you better off today than you were four years ago?"

That question first became famous when asked in 1980 by then-presidential candidate Ronald Reagan. Every four years since, polling firm Gallup has asked that question whenever a presidential election is held in the U.S.

In 2020, the year of the coronavirus pandemic and a deep recession, they received a surprising response when asking that question of registered voters:

Gallup's most recent survey found a clear majority of registered voters (56%) saying they are better off now than they were four years ago, while 32% said they are worse off.

Gallup provides a chart showing the graphical results of their polling in the fourth year of the first terms of Presidents Ronald Reagan (1984), George H.W. Bush (1992), George H.W. Bush (2004), Barack Obama (2012), and Donald Trump (2020).

Gallup (7 October 2020): Americans' Views on Whether They're Better or Worse Off Than Four Years Ago

How could that possibly be? Thanks to state and local government lockdown orders that shuttered businesses and required Americans to stay-at-home in late March 2020, the U.S. economy has been experiencing one of the sharpest, deepest recessions in its history, from which it has only begun recovering in recent months as those lockdowns have been lifted. And yet, when asked during the two week period from 14 September through 28 September 2020, a clear majority of Americans stated they and their families were better off than four years ago.

We have unique data that explains that outcome, at least as it applies to the typical American household. Median Household Income is the measure of total money income earned by the American household at the exact middle of the nation's income earning spectrum. 50% of American households have higher incomes, 50% of American households have lower incomes.

Tracking how median household income changes over time can tell us a lot about the state of the typical American household. Not only can it tell us whether nominal incomes are rising or falling with economic conditions, if we adjust it for consumer price inflation, it can tell us a lot about the buying power of the incomes Americans earn.

We've visualized that information in a single chart that shows median household income measured in both these ways.

Median Household Income in the 21st Century: Nominal and Real Modeled Estimates, January 2009 - August 2020

The chart covers the period from January 2009 through August 2020, which captures the eight years of President Obama's tenure in office and most of President Trump's. With the 2020 presidential election a race between Joe Biden, who served as Vice President during President Obama's terms in office, and Donald Trump, who is running for reelection, it seems most appropriate to focus on this period to evaluate the effect of their respective policies on the welfare of the typical American household.

We see that nominal median household income, shown as the red data series in the chart, declined from $50,608 in January 2009 to $48,559 in early 2010, which then rose at a steady rate through 2016, before accelerating after January 2017. It ultimately peaked at $66,639 in February 2020 as the U.S. economy peaked before the onset of the coronavirus recession in March 2020. Through August 2020, median household income has fallen to $65,602.

The inflation adjusted data, shown as the blue data series, tells a similar story but with meaningful differences. In terms of constant August 2020 U.S. dollars, the Obama-Biden era began with median household income at $62,299, which then fell to $57,209 in early 2011. The buying power of the median income-earning U.S. household then stayed flat until mid-2014, when it finally began recovering.

Inflation-adjusted median household income would go on to slightly surpass its January 2009 level in early 2016, and then largely stagnated for the rest of the year before peaking in December 2016 at $62,440. A few months after President Trump assumed office in January 2017, the stagnation ended and the buying power of the typical American household rose above the levels recorded throughout the Obama-Biden era. The inflation adjusted median household income ultimately peaked at $67,131 in early 2020, but has since fallen with the coronavirus recession to its current level of $65,602.

These outcomes help explain the difference in Gallup's polling results for both 2012 and 2020. For 2020, a clear majority of Americans are answering that they are better off than four years ago because they are better off, even with the negative impact of the coronavirus recession.

Speaking of which, we see indications the recessionary trend for median household income in the U.S. reached a bottom in August 2020. We anticipate September 2020's data will show the first increase in this measure since the coronavirus recession began, as the economic recovery gains traction. The data for September 2020 will become available on 30 October 2020.

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 monthly estimates of median household income based upon our alternate methodology. Our references and 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 September 2020. Accessed: 10 September 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: 1 October 2020. Accessed: 1 October 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: 1 October 2020. Accessed: 1 October 2020.

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