February Real Median Household Income Was Fractionally Below January’s Post-Recession High

wall-street-etfDoug Short:  The Sentier Research median household income data for February, released this morning, came in at $57,129. The nominal median declined $159 month-over-month but is up $2,562 year-over-year.

That’s a decline of 0.1% MoM and 4.7% YoY increase. Adjusted for inflation, the latest income was down $63 MoM but up $2,031 YoY. The real numbers equate to increases of 0.2% MoM and 4.0% YoY.

In real dollar terms, the median annual income is 1.0% lower (-$5719) than its interim high in January 2008 but well off its low in August 2011.

Background on Sentier Research

The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for the previous year.

Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates. Sentier Research has now released its most recent update, data through November (available here). The numbers in their report differ from the Census Bureau’s in three key respects:

  1. It is a monthly rather than annual series, which gives a more granular view of trends.
  2. Their numbers are more current. The Census Bureau’s most recent is the 2014 annual data released in September 2015.
  3. Sentier Research uses the more familiar Consumer Price Index (CPI) for the inflation adjustment. The Census Bureau uses the little-known CPI-U-RS (RS stands for “research series”) as the deflator for their annual data. For more on that topic, see this commentary.

Monthly Median Household Income Since 2000

The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

Household Income

In the latest press release, Sentier Research spokesman Gordon Green summarizes the recent data:

“We continue to see an upward trend in income that has been evident since the low point in August 2011. Relatively low energy prices have contributed significantly to increases in real median household income. We have recaptured all of the income losses that have occurred since the beginning of the last recession in December 2007. The February 2016 median is now only 0.3 percent lower than the median of $57,291 in January 2000, the beginning of this statistical series.”

As for the data itself, Sentier makes it available in Excel format for a small fee (here). We have used the latest Sentier data to create the charts in this update illustrating the nominal and real income trends during the 21st century.

The blue line in the chart above paints the less optimistic “real” picture. Since we’ve chained in latest dollar value and the overall timeframe has been inflationary, the earlier monthly values are adjusted upward accordingly. In addition to the obvious difference in earlier real values, we can also see that real incomes peaked before the nominal (January of 2008, one month after the recession began, versus July 2008). Also the real post-recession decline bottomed later than the nominal (August 2011 versus September 2010).

The next chart is our preferred way to show the nominal and real household income — the percent change over time. Essentially we have taken the monthly series for both the nominal and real household incomes and divided them by their respective values at the beginning of 2000. The advantage to this approach is that it clearly quantifies the changes in both series and avoids a common distraction of using dollar amounts (“How does my household stack up?”).

Household Income Growth

The reality illustrated here is that the real median household income series spent most of the first nine years of the 21st century struggling slightly below its purchasing power at the turn of the century. Real incomes (the blue line) hit an interim peak at a fractional 0.7% in early 2008, far below the nominal illusionary interim peak (as in money illusion) of 27.2% six months later and the latest at 40.0%, fractionally off the 40.4% record high in January of this year. The real median household income is now at -0.3% from its turn-of-the-century level. In essence, the real recovery from the trough has been frustratingly slow.

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