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posted on 04 March 2015

Median Household Income Improves Marginally in January 2015

from Sentier Research

According to new estimates derived from the monthly Current Population Survey (CPS) median annual household income in January 2015 was $54,332, an increase of $321 that was not statistically significant from the December median of $54,011. This apparent increase in real median income was due largely to the 0.7 percent decline in consumer prices in January. While not statistically significant, this reading extends the series of upward movements in our median household income estimates.

The Sentier Household Income Index stands at 96.1 (January 2000 = 100.0) indicating that median household income in January 2015 was 3.9 percent lower than January 2000.

Real median annual household income has shown some improvement since the low point in our household income series that occurred in August 2011. Median income in January 2015 ($54,332) was 3.4 percent higher than in January 2014 ($52,559), and 6.3 percent higher than in August 2011 ($51,126). The period since August 2011 has been marked by an uneven, but generally upward trend in the level of real median annual household income. Many of the month-to-month changes in median income during this period have not been statistically significant. However, the cumulative effect of the various month-tomonth changes since August 2011 resulted in the income improvement noted above. (See Figure 1 - full report here)

[click on image to enlarge]

According to Gordon Green of Sentier Research:

Even though there was not a statistically significant increase in median income between December and January, there has been a general upward trend in median income since the low-point reached in August 2011. Our time series charts clearly illustrate that although the economic recovery officially began in June 2009, the recovery in household income did not begin to emerge until after August 2011. A significant factor contributing to the trend in median income has been the sharp decline in the Consumer Price Index (CPI) in recent months, largely due to falling energy prices.

Highlights

The January reading on the labor market from the U.S. Bureau of Labor Statistics showed a slight worsening compared to December:

  • The official unemployment rate in January 2015 was 5.7 percent, not significantly different from 5.6 percent in December 2014.
  • The median duration of unemployment was 13.4 weeks in January 2015, up from 12.6 weeks in December 2014.
  • The broader measure of employment hardship, which includes the unemployed, marginally attached workers (of which discouraged workers are a subset), and persons working part-time for economic reasons, was 11.3 percent in January 2015, not significantly different from 11.2 percent in December 2014.

Real median annual household income in January 2015 can be put into broader perspective by comparisons with previous levels of household income since the recession began and dating back to the start of the last decade:

  • The January 2015 median income of $54,332 was 1.0 percent lower than the median of $54,873 in June 2009, the end of the recent recession and beginning of the "economic recovery."
  • The January 2015 median was 2.8 percent lower than the median of $55,896 in December 2007, the beginning month of the recession that occurred more than seven years ago.
  • The January 2015 median was 3.9 percent lower than the median of $56,561 in January 2000, the beginning of this statistical series.

The Sentier Household Income Index (HII) shows the value of real median annual household income in any given month as a percent of the base value at the beginning of the last decade (January 2000 = 100.0 percent):

  • The Sentier HII for January 2015 stood at 96.1 compared to 98.8 in December 2007, when the "great recession" began, and 97.0 in June 2009, when the "economic recovery" subsequently began.
  • The Sentier HII in August 2011 was 90.4 compared to 96.1 in January 2015.

Notes:

Income amounts in this report are before-tax money income and have been adjusted for inflation; income amounts have been seasonally adjusted, unless otherwise noted.

Estimates of median annual household income and the Household Income Index (HII) provide the only measures of change in household income during 2013 and 2014. The U.S. Census Bureau issued its official estimates of income and poverty for calendar year 2012 in a report released on September 17, 2013.

The estimates in this report are based on the Current Population Survey (CPS), the monthly household survey that provides official estimates of the unemployment rate. The CPS samples approximately 50,000 households and 135,000 household members each month. As is the case with all surveys, the estimates are subject to sampling and nonsampling errors. All comparisons made in the report have been tested and found to be statistically significant at the 90-percent confidence level, unless otherwise noted.

Household income is defined as the sum of the incomes of all household members. Income refers to all sources of money income including earnings from work, Social Security, interest, dividends, cash welfare, retirement pensions, unemployment compensation, veterans' benefits, etc. Income excludes capital gains and losses, and lump-sum, one-time amounts. Household income is measured before the payment of federal and state income taxes and Social Security payroll taxes.


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