Editorial Board

What Those Household Income Figures Really Mean

The 99 percent are doing better, but that doesn't mean all is well in the economy.

Not yet living the dream.

Photographer: Mark Makela/Getty Images

The 99 percent did surprisingly well in 2015: That’s the message of two Census reports published this week. It’s good news -- and a reminder, if one were needed, of the link between rising employment and higher living standards. But it doesn't mean all is well in the economy.

The Current Population Survey says that median household incomes went up by an inflation-adjusted 5.2 percent in 2015, the largest rise since records began in 1967. The separate American Community Survey put the increase at 3.9 percent 1 . According to both reports, poorer households saw among the biggest gains.

Rising employment appears to have driven the improvement as much as surging wages. The median earnings of male full-time year-round workers went up by just 1.5 percent, according to the CPS. Wage growth is starting to pick up, according to other surveys, but isn't yet signaling a tight labor market or impending inflation.

Another thing worth bearing in mind: At $56,516, median household income in 2015 (as estimated by the CPS survey) still fell short of where it was in 2007, before the recession. And monthly data produced by former Census officials at Sentier Research suggests that the increase stalled in the first half of 2016. Here's how that looks:

Median Household Income

Source: Sentier Research

That's worrying. Rising household incomes have been propping up the broader economy. Without strong growth in consumer spending, the U.S. would have dipped back into recession in the first half of this year as business investment and government spending declined. Real gross domestic product grew at an average annualized rate of less than 1 percent in the first half of the year, and inflation remained well below the Federal Reserve's 2 percent target.

QuickTake Secular Stagnation

Despite that strong report on median earnings, the economy is still limping, more than seven years after the recession ended. That's partly because policy makers have relied too much on the central bank to support growth and done too little to spur public and private investment. Both things will have to change for the rise in household incomes to be sustained.

  1. The ACS survey was conducted throughout 2015 and asked people how much they made in the previous 12 months, so it might not have picked up all of the 2015 income gains. The CPS survey was conducted in early 2016, and asked people how much they made in the year 2015.

--Editors: Mark Whitehouse, Clive Crook

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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