How different would the trajectory of median household income have been if not for what changed in March 2021?
That marks the last month before the growth of the trailing year average of personal earned income per capita in the U.S. began growing more quickly than it had before that time. But instead of changing with it at the same rate it had established during the preceding six years, median household income has grown much more slowly in all the months since.
How much more slowly can be seen in the following chart. We've established a counterfactual based on how median household income would have changed if the existing trend from March 2015 through March 2021 had continued, and show how that compares with how median household income has actually changed in the period from March 2021 through July 2023. The difference is substantial.
The figures indicated for December 2021 and December 2022 in the new trend correspond to the U.S. Census Bureau's annual estimates for median household income for their calendar years. We find that through December 2021, median household income was 3.3% less than the counterfactual projects. Through December 2022, the difference increases to 6.4%.
The period in which the growth of median household income slowed compared to its previous trend coincides with the onset of high inflation within the U.S. economy. From March 2015 through March 2021, consumer inflation in the U.S. ranged between -0.1% and +2.9%, and was +2.6% in March 2021. Since March 2021, it has been as high as +9.1% (June 2022) and has not been less than 3.0% (June 2023). It was 3.2% in July 2023.
In the face of such inflation, the slower pace of median household income growth since March 2021 is especially painful. Slower nominal income growth combined with an elevated rate of inflation makes that outcome inevitable.
For the latest in our coverage of median household income in the United States, follow this link!
References
Political Calculations. Comparing Median Household Income Estimates and Visualizing Trends. [Online Article]. 20 September 2023.
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: 31 August 2023. Accessed: 31 August 2023.
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: 31 August 2023. Accessed: 31 August 2023.
U.S. Census Bureau. Current Population Survey, 1968 to 2023 Annual Social and Economic Supplements (CPS ASEC). [Excel Spreadsheet]. 12 September 2023.
Image credit: Losing money for a variety of reasons photo by Jp Valery on Wikimedia Commons. Creative Commons. Attribution-ShareAlike 4.0 International (CC BY-SA 4.0). Photo by Jp Valery also available on Unsplash.
Labels: median household income
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