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posted on 15 March 2016

January 2016 Median Household Income Continues to Close On January 2000 Levels.

from Sentier Research

According to new data derived from the monthly Current Population Survey (CPS), median annual household income in January 2016 was $57,288, not significantly different from the December 2015 median of $57,173. The Sentier Household Income Index for January 2016 was 99.8 (January 2000 = 100), only 0.2 percent below the level measured for 2000 after adjusting for inflation ($57,387).

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.

There has been a general upward trend in median household income since the postrecession low point reached in August 2011. This upward trend was initially marked by monthly movements, both up and down. Many monthly changes were not statistically significant. By the summer of 2014 however, that uneven trend became dominated by a series of significant monthly increases. (See Figure 1 - full report here)

[click on image to enlarge]

/images/z%20SentierResearch.png

Median income in January 2016 ($57,288) was 4.0 percent higher than in January 2015 ($55,097), and 10.3 percent higher than in August 2011 ($51,945). This general upward trend reflects, in part, the low level of inflation as measured by the CPI for all items (used in this series). For example, the 4.0 percent increase in median household income between January 2015 and January 2016 derived using the CPI for all items becomes 3.1 percent when the CPI less food and energy is employed to adjust for the change in purchasing power.

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 2 recession in December 2007. The January 2016 median is now only 0.2 percent lower than the median of $57,387 in January 2000, the beginning of this statistical series.

The January reading on the labor market from the U.S. Bureau of Labor Statistics is mixed compared to December:

  • The official unemployment rate in January 2016 was 4.9 percent, not significantly different than the December 2015 rate of 5.0 percent.
  • The median duration of unemployment increased, from 10.5 weeks in December 2015 to 10.9 weeks in January 2016.
  • 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 9.7 percent in January 2016, down slightly from 9.9 weeks in December 2015.

Real median annual household income in January 2016 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 January 2016 median income of $57,288 is 2.9 percent higher than the median of $55,675 in June 2009, the end of the recent recession and beginning of the "economic recovery."
  • The January 2016 median is 1.0 percent higher than the median of $56,713 in December 2007, the beginning month of the recession that occurred more than eight years ago.
  • And the January 2016 median is now only 0.2 percent lower than the median of $57,387 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 99.8 in January 2016, higher than December 2007 (98.8) 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 99.8 in January 2016.

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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