Median Household Income Again Statistically Unchanged in December 2013

from Sentier Research

Real Median Income has been on an almost imperceptible growth path for two years. According to new data derived from the monthly Current Population Survey (CPS), median annual household income in December 2013 was $52,297, not statistically different than the November 2013 median of $52,318.

Real median annual household income has shown some improvement over the past two and a half years since the low point in our household income series that occurred in August 2011. Median income in December 2013 ($52,297) was not significantly different than December 2012 ($52,352), but was 2.4 percent higher than in August 2011 ($51,079). The period since August 2011 has been marked by an uneven, but generally upward trend in the level of real median annual household income. While many of the month-to-month changes in median income during this period have not been statistically significant, there have been two notable decreases and one notable increase. Median income decreased by 1.7 percent between December 2011 ($52,419) and January 2012 ($51,533). There was a decrease in median income of 1.1 percent between January 2013 ($52,399) and February 2013 ($51,804), which was the first significant decline since the change recorded between December 2011 and January 2012. Median income increased by 0.7 percent between May 2013 ($52,111) and June 2013 ($52,464), which marked the first statistically significant increase in the median in well over a year. The cumulative effect of the various month-to-month changes since August 2011 resulted in the income improvement noted above. (See Figure 1 below.)

[click on image to enlarge]

According to Gordon Green of Sentier Research,

Since August 2011, the low-point in our household income series, we have seen some improvement in the level of real median annual household income. While the trend in household income since August 2011 has been uneven, on balance we have seen an upward movement of 2.4 percent since August 2011. We still have a significant amount of ground to make up to get back to where we were before, but at least we have shown some improvement since the low point.

Highlights

The December reading on the labor market from the U.S. Bureau of Labor Statistics indicates an improved situation in the unemployment rate compared to November, but little movement in other key labor force indicators:

• The official unemployment rate in December 2013 was 6.7 percent, down significantly from the 7.0 percent rate in November 2013.
• The median duration of unemployment was 17.1 weeks in December 2013, compared to 17.0 weeks in November 2013.
• 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 13.1 percent in December 2013 compared to 13.2 percent in November 2013.

Real median annual household income in December 2013 can be put into broader perspective by comparisons with previous levels of household income dating backto the start of the last decade:

• The December 2013 median income of $52,297 was 4.7 percent lower than the median of $54,861 in June 2009, the end of the recent recession and beginning of the “economic recovery.”
• The December 2013 median was 6.4 percent lower than the median of  $55,870 in December 2007, the beginning month of the recession that occurred six years ago.
• The December 2013 median was 7.5 percent lower than the median of $56,538 in January 2000, the beginning of this statistical series.

The 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 HII for December 2013 stood at 92.5 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 HII in August 2011 was 90.3 compared to 92.5 in December 2013.
• The HII had increased steadily from August 2011 (the low point) to December 2011: 90.3 in August, 91.0 in September, 91.6 in October, 91.8 in November, and 92.7 in December.

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. 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.