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posted on 29 February 2016

December 2015 Median Household Income Closing In On January 2000 Levels.

from Sentier Research

According to new data derived from the monthly Current Population Survey (CPS), median annual household income in December 2015 was $57,153, up $424 (or 0.7 percent) from the November 2015 median of $56,729. As noted in our previous report, we have recaptured all of the ground in the median lost since the beginning of the last recession in December 2007 ($56,698). The Sentier Household Income Index for November 2015 was 99.6 (January 2000 = 100). Thus, we are getting very close to the real level of median annual household income that existed in January 2000 ($57,371).

There is a generally upward trend in income that has been evident since the low point in our household income series that occurred in August 2011. Median income in December 2015 ($57,153) was 4.3 percent higher than in December 2014 ($54,785), and 10.2 percent higher than in August 2011 ($51,859). However, a significant portion of the increase in real median annual household income is due to the falling price of energy. For example, if the CPI less food and energy is used instead of the CPI including all items, the increase in real median annual household income between December 2014 and December 2015 was 2.9 percent, not 4.3 percent.

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-to-month changes since August 2011 resulted in the income improvement noted above. (See Figure 1 - full report here)

[click on image to enlarge]

/images/z%20SentierResearch.png

According to Gordon Green of Sentier Research:

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 December 2015 median is now only 0.4 percent lower than the median of $57,371 in January 2000, the beginning of this statistical series.

The December reading on the labor market from the U.S. Bureau of Labor Statistics showed marginal improvement compared to November:

  • The official unemployment rate in December 2015 was 5.0 percent, the same level as November.
  • The median duration of unemployment was down slightly, from 10.7 weeks in November 2015 to 10.5 weeks in December 2015.
  • 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 9.9 percent in December 2015, the same level as in November 2015.

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

  • The December 2015 median income of $57,153 is 2.7 percent higher than the median of $55,660 in June 2009, the end of the recent recession and beginning of the "economic recovery."
  • The December 2015 median is 0.8 percent higher than the median of $56,698 in December 2007, the beginning month of the recession that occurred eight years ago.
  • And the December 2015 median is now only 0.4 percent lower than the median of $57,371 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 stood at 99.6 in December 2015, higher than December 2007 (98.8 percent) when the "great recession" began, and 97.0 in June 2009, when the "economic recovery" subsequently began.
  • The Sentier HII was 90.4 in August 2011, the low point in our household income series, compared to 99.6 in December 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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