Unexpectedly Intriguing!
October 1, 2020

Political Calculations' initial estimate of median household income in August 2020 is $65,602, dipping 0.1% from July 2020's initial estimate of $65,672. This change confirms a decelerating rate of decline for median household income in the U.S. caused by the Coronavirus Recession and potentially marks its bottom.

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

Since peaking at $66,639 in February 2020, median household income in the U.S. has declined by 1.6% through August 2020. The year-over-year rate of change for median household income confirms its slowing rate of decline of this measure in nominal terms. The increase in inflation for the month however has dropped the inflation-adjusted growth rate into negative territory, which can be seen in the next chart.

The Bureau of Labor Statistics' consumer price inflation report for August 2020 indicates the largest contributors to the month's inflation increase came in the form of energy prices and used cars. We already know energy prices declined in September 2020, where we would anticipate this measure decelerating with the next month's data.

Analyst's Notes

In September 2020, minor revisions were made to the aggregate personal wage and salary income data we use to generate our estimates of median household income, which affects estimates from April 2020 through July 2020.

The U.S. Census Bureau issued its Household Income report for the 2019 in September 2020, giving $68,703 as its estimate of median household income for the 2019 calendar year. At first glance, that figure would suggest our monthly median household estimates are understating the growth of median household income by a considerable margin, however the Census confirms the arrival of the coronavirus pandemic in the U.S. impacted its data collection in March 2020, increasing the non-response rate to its Current Population Survey's Annual Social and Economic Supplement and skewing its reported results upward because of the disruption of the pandemic.

The Census Bureau's analysts indicate the survey's resulting estimate overstates median household income by 2.8%, indicating that it increased to $66,790. That figure is within $151 of Political Calculations' median household income estimate for February 2020 and represents one of the stronger year-over-year gains observed in the annual data since it began to be reported in 1967.

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.

We're also disappointed to report Sentier Research no longer appears to be an operating entity. The firm was started and operated by former Census Bureau analysts Gordon Green and John Coder, who we suspect have officially retired after nearly a 19-year run! One interesting footnote to their long careers is that the Census Bureau's 2019 household income report, and especially its supplemental report indicating its overestimate of median household income for 2019, validates the methodology they developed to quantify median household income from the Census Bureau's monthly Current Population Survey data. The estimates they produced using the survey's monthly data samples could be volatile from month to month, but over time, they proved they could reasonably estimate the level of median household income in the U.S. and accurately capture its overall trends.

That's not a surprise to us, since we have been able to replicate their results within a relatively small margin of error using entirely other datasets....

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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