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posted on 30 December 2016

November 2016 Median Household Income Not Statistically Different Than January 2016

from Sentier Research

According to new data derived from the monthly Current Population Survey (CPS), median annual household income in November 2016 was $58,221, a nearly significant increase from the October 2016 median of $58,045.

Median household income at the beginning of the great recession in December 2007 was $57,723. The Sentier Household Income Index (HII) for November 2016 was 99.7, slightly higher than the October reading of 99.4 (January 2000 = 100). The level of real median annual household income in January 2000 was $58,410, which marks the beginning of this statistical series.

Even though the November 2016 median annual household income reading was not statistically different than October, there has been a 1.2 percent increase in real median income since May 2016. More broadly, there has been a general upward trend in median household income since the post-recession 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.)

Median annual household income in November 2016 ($58,221) was 0.7 percent higher than in November 2015 ($57,789), and 10.1 percent higher than in August 2011 ($52,870). 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 0.7 percent increase in median household income between November 2015 and November 2016 derived using the CPI for all items becomes 0.3 percent when the CPI less food and energy is employed to adjust for the change in purchasing power - full report here.

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According to Gordon Green of Sentier Research:

Median annual household income in 2016 has not been able to maintain the momentum that it achieved during 2015. Real median income in January 2016 was $58,308, not significantly different than the November 2016 reading of $58,221. However real median income has increased by 1.2 percent from May 2016, when it was $57,552. We continue to monitor the course of inflation, as this has a significant effect on the trend in real median annual household income. We are now at a point now where median household income is slightly higher than at the beginning of the great recession in December 2007, and only 0.3 percent lower than January 2000, the beginning of this statistical series."

The November reading on the labor market from the U.S. Bureau of Labor Statistics shows some improvement compared to October:

  • The official unemployment rate in November 2016 was 4.6 percent, significantly lower than the October 2016 rate (4.9 percent).
  • The median duration of unemployment was 10.1 weeks in November 2016, not significantly lower than the October 2016 level (10.2 weeks).
  • However, 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 9.3 percent in November 2016, significantly lower than the October 2016 reading (9.5 percent).

Real median annual household income in November 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 November 2016 median income of $58,221 is 2.7 percent higher than the median of $56,667 in June 2009, the end of the recent recession and beginning of the "economic recovery."
  • The November 2016 median is 0.9 percent higher than the median of $57,723 in December 2007, the beginning month of the recession that occurred almost nine years ago.
  • And the November 2016 median is now only 0.3 percent lower than the median of $58,410 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 99.7 in November 2016, higher than December 2007 (98.8) when the "great recession" began, and higher than June 2009 (97.0), when the "economic recovery" subsequently began.
  • The Sentier HII was 90.5 in August 2011, the low point in our household income series, compared to 99.7 in November 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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