Alternate Estimates Of Median Household Income

Posted: Apr 04, 2019 9:25 AM

Back in June 2017, shortly after the demographic analytics firm Sentier Research suspended reporting their monthly median household income estimates for the U.S., we developed an alternate method for estimating that important bit of near real-time economic data and took on the challenge of providing those monthly estimates in Sentier's absence.

In May 2018, Sentier resumed reporting their estimates of monthly median household income, where we've continued reporting our alternate estimates, which we view as a companion or complement to their Current Population Survey-based data. Since our estimates are based on different source data, we recognize that it can provide useful comparisons with Sentier's Census-based estimates, which are a bit noisier.

Which brings us to today, where we are following up a question that came up after Sentier Research reported the first major dip in median household income since 2016 in February 2019. Coming at a time when economic growth in the U.S. appears to have decelerated in recent months, we wondered if our alternate method would show a similar trend.

After having to wait for the data on which our alternate estimate is based to be reported, we found the answer is "not yet" when we looked at the nominal estimates (red), which is the relevant measure. The following animated chart compares our alternate estimates with Sentier Research's reported figures for each month from January 2001 through February 2019, where we find that our alternate estimate still indicates a rising trend.

Click here to view the GIF.

Since our alternate estimate incorporates a trailing average of annual wage income in its formulation, we expect that it will be both smoother than Sentier Research's monthly estimates and slower to respond to changing conditions in the economy, which would make it a lagging indicator, which is why we say that it does not yet indicate a slowdown in median household income growth has occurred. We will periodically feature updates to this analysis in our regular median household income series.

Separately, the source data series for our alternate estimates periodically go through substantial revisions, which can affect what our alternate estimates indicate. The aggregate wage income data we use last went through a major revision in July 2018, and minor revisions are made to data for recent months on an ongoing basis. Meanwhile, the population data we incorporate in our alternate estimates was just revised in March 2019.